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G.P.

THE HISTORY

The Surplus Revenue of 1837

AN ACCOUNT OF ITS C RIGIN, ITS DISTRIBUTION AMONG THE

STATES, AND THE USES TO WHICH IT

WAS APPLIED

EDWARD G. BOURNE, B.A.

FOOTE SCHOLAR IN YALE COLLKGK

NEW YORK & LONDON

G. P. PUTNAM'S SONS

Stije $nirktibock« ^rtss

1885

G. P. PUTNAM'S SONS
1885

Press of

G. P. Putnam's Sons

New York

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MY FATHER AND MOTHER

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PREFACE.

In the following pages I have endeavored to present a complete
and impartial history of the origin and growth of the Surplus
Revenue of 1837, and more especially of its disposition by the
States among which it was divided.

The work may seem to the general reader more like a collection
of facts than the story of an important incident in our history.
Of this defect, if it be a defect, I am as well aware as one can be;
but if I am not mistaken this is the natural function of first
works in a new field. Some one must clear the ground, loosen
the soil, and raise a plain but useful crop before the finer growths
can flourish.

Until after most of my material had been collected I supposed
I was an absolute pioneer in making a thorough investigation of
the history of the surplus in the States. I was then informed
that Mr. Eaton, U. S. Commissioner of Education, had touched
upon the subject in an address delivered in 1877. Some ten pages
of this address were devoted to the appropriations for education
which thirteen of the States had made from portions of the sur-
plus that had been deposited with them.

Mr. Eaton, however, studied the matter only in its relation to
the question of national aid to education, and so took note of
only such appropriations of the money as were made for schools;
he merely looked in upon the field rather than explored it.

Some prefatory remarks upon the method and scope of the in-
vestigation are prefixed to the Bibliographical Index.

I wish to acknowledge my obligations to the correspondents
who have kindly helped me in gathering the facts. To Prof-
Sumner I am under especial obligations for directing my attention
to this subject, and for encouragement since the work was under-
taken.

Corrections of errors or any additional information will be grate-
fully received.

E. G. B.

New Haven, May, 1885.

CONTENTS.

CHAPTER I.

PACK

The surplus question — Early proposals of distribution . . . . i

CHAPTER II.
The growth and disposition of the surplus ...... 12

CHAPTER III.
The different opinions of the measure ....... 21

CHAPTER IV.

The specie circular — The growing surpluses — Succeeding surplus, and the

action taken by the States upon tlie deposits ..... 27

CHAPTER V.

The steps taken to carry out the act — The panic and the fourth in-
stalment ............ 35

CHAPTER VI.
The surplus in the States ... ...... 44

CHAPTER VII.
The surplus in the States. (Continued) . . . . ... 56

CHAPTER VIII.
The surplus in the States. (Continued) ....... 70

CHAPTER IX.
The surplus in the States. (Continued) ... .... 82

CHAPTER X.
The surplus in the States. (Continued) 95

CHAPTER XI.
The surplus in the States. (Concluded) ....... 107

vii

Vlll CONTENTS.

CHAPTER XII.

PACE

Some general effects of the accumulation and distribution of the surplus,

especially upon the internal improvement system .... 125

APPENDIX I.

A supplement to "Examiner's" views, mentioned on page 16. The
attempt is simply to calculate what would have been the excess of
receipts over expenditures of the Government if there had been no
fever of speculation . . . . . . . . . .137

APPENDIX II.

Statement of amount on deposit in the New York banks, to the credit of
the Government, January i, 1837, also the same April 26th, and the
amounts credited to the State April 26th. By subtracting the sum of
the last two columns from the first, we get, as a remainder, the amount
of Government funds withdrawn from New York in less than four
months 139

APPENDIX III.
A list of the towns in Massachusetts that appropriated more or less to

education, from the surplus revenue, during the years 1841 and 1846 . 145

APPENDIX IV.

The appropriations for schools made from the " Surplus Revenue " by the towns
in New Hampshire during four years ...... 149

Bibliographical Index . . . . . . . , . .151

THE HISTORY OF THE SURPLUS
REVENUE OF 1837

CHAPTER I.

THE SURPLUS QUESTION — EARLY PROPOSALS OF DISTRIBUTION,

The Secretary of the Treasury, in his annual report, dated De-
cember 3, 1883, announced that according to present estimates all
bonds payable at the pleasure of the Government would be re-
deemed before June 30, 1887. The debt then remaining will
consist chiefly of " four and a half per cents.," redeemable Sep-
tember I, 1891, and "four per cents.," redeemable July i, 1907.
Before these dates these bonds can be redeemed only by paying a
large and growing premium.

Within less than three years, then, supposing no serious dimi-
nution of the national revenue to be effected by legislation or
treaty, the country will be brought face to face with a very urgent
financial question. For either some sudden and radical reduction
of taxation must take place, or the debt must be bought at a great
disadvantage, or a surplus of upward of $85,000,000 a year must
be disposed of.

This prospect of a great surplus has aroused some discussion,
but it has hardly received the attention that it deserves. Some
attempts, also, have been made to reduce the revenue, but as yet
they have been unavailing.

Roughly speaking, three ways are proposed to meet this surplus
question ; two by the protectionists, and one by the revenue re-
formers, or free-traders, as they are commonly called.

The revenue reformers demand a reduction of taxation suffi-
cient to forestall any troublesome surplus. They do not consent
to the abolition of the excise taxes on spirits, fermented liquors,

2 SURPLUS REVENUE.

and tobacco, because these taxes collect a large revenue without
increasing the cost of the necessaries of life.

On the other hand, a large number of the uncompromising pro-
tectionists demand the immediate repeal of our internal revenue
laws as the surest and safest way to lessen the national income.

These two propositions strike at the root of the evil by reducing
taxation. The other division of the protectionists, however, take
the bull by the horns, and, instead of regarding a surplus as dan-
gerous and likely to be a nuisance, they look upon it as an un-
mixed blessing.

This party is led by men belonging to the National or Pennsyl-
vania school of political economy. They agree with the revenue
reformers in considering the excise too useful a tax to be dis-
pensed with ; but, on the other hand, they hold that, apart from
questions of revenue, a high protective tariff is a good thing in
itself. With these views, they are strictly logical when they
declare that the surplus should be used rather than that steps
should be taken to prevent its accumulation. If their premises
in regard to protection and the excise are sound, their position is
impregnable ; for it would be folly to give up a great good like
protection to avoid the little trouble of rightly using a possible
surplus.

This party accordingly propose, as a solution of the problem,
the distribution of the surplus among the States.' To disarm

' See Thompson and " The Surplus Question." The following bills were
introduced during the first session of the Forty-eighth Congress (1884) :

January 8th, Mr. Goff, of West Virginia, (by request,) introduced a bill to
appropriate a portion of ihe surplus revenue of the United States among the
several States and Territories (H. R., 2886 ; 15 Cong. Record, 294).

January 2gth, Mr. Evans, of Pennsylvania, (by request,) introduced a bill
(H. R., 4268) to provide for the general welfare by the advancement of education
and the extinction of the public debt in the several States of the United States
through the utilization of the surplus revenue (15 Cong. Rec, 737). This is, I
suppose, what was known through the press as the " Wharton Barker scheme "
of distribution, and Prof. Thompson's pamphlet was written to expound and
defend it. To meet any constitutional objections it is so worded as to find ref-
uge under the broad shelter of the " general welfare clause."

May I2th, Mr. Barbour, of Virginia, introduced a joint resolution to complete

SURPLUS REVENUE. 3

prejudice, they affirm that it is no new thing ; that the idea was
favorably entertained by the great men of the past ; and that, in
fact, it has been tried once, in 1837, under some disadvantages,
but even then with encouraging results.

To enable people to judge whether the so-called distribution of
1837 is a precedent for what has been lately proposed, and to set
forth for the first time a full account of a once exciting, but now
almost forgotten, incident in our financial history, is the aim of
this work.

So far as the writer knows, Thomas Jefferson was the first to
propose a distribution of surplus revenue. Such a proposition he
advanced in his second inaugural address, delivered March 4,
1805, while speaking of the import duties. ''These contribu-
tions," said he, " enable us to support the current expenses of the
Government, to fulfil contracts with foreign nations, to extinguish
the native right of soil within our limits, to extend those limits,
and to apply such a surplus to our public debts as places at a
short day their final redemption, and that redemption once
effected, the revenue thereby liberated may, by a just repartition
among the States, and a corresponding amendment of the Consti-
tution, be applied, in time of peace, to rivers, canals, roads, arts,
manufacturers, education, and other great objects within each
State." '

The excess of revenue which Jefferson expected appeared in
Gallatin's report of December, 1805, where it was shown that
" the surplus in the Treasury, after meeting all the regular ex-
penditures and Navy deficiencies, French claims, and the
$1,750,000 of the Louisiana purchase, for which a loan had been
authorized, would still exceed one million dollars on a reasonable
estimate." The debt would be paid within four years. The next
year there was a surplus of $4,000,000 in the Treasury, and " only

the deposits of the fourth instalment of the surplus revenue of the United States
with such of the States as were entitled thereto under the act of June 23, 1836
(H. R., 249 ; 15 Cong. Rec, 4078).

No one of these bills has yet been discussed, so far as I know.

' 8 Jefferson's Works, 41.

4 SURPLUS REVENUE.

three years remained before the day when some disposition must
be made of the excess of revenue." '

With this problem in view, Jefferson, instead of suggesting a
gradual reduction in the revenue, said : " Shall we suppress the
impost, and give that advantage to foreign over domestic manu-
factures ? On a few articles of more general and necessary use
the suppression in due season will doubtless be right, but the great
mass of the articles on which impost is paid are foreign luxuries,
purchased by those only who are rich enough to afford themselves
the use of them. Their patriotism would certainly prefer its con-
tinuance and application to the great purposes of the public edu-
cation, roads, rivers, canals, and such other objects of public
improvement as it may be thought proper to add to the constitu-
tional enumeration of federal powers." ^

It will strike the reader perhaps that Jefferson's ideas have
been carried out practically by the great log-rolling appropriation
bills of later times. This is true in a sense, but Jefferson's propo-
sitions nevertheless deserve mention in an account of the attempts
at distribution,

Jefferson and Gallatin had large plans for a National University,
but they were not destined to be realized. To be sure, there was
a surplus of over five million dollars in 1807, but it rapidly dis-
appeared as Jefferson's great gun-boat scheme was carried into
effect. What was left after this waste ^ was soon absorbed in
general expenditures, since the embargo, another favorite measure,
well-nigh destroyed the commerce which filled up the Treasury.

1 Adams' " Gallatin," 348-9.

" It is but justice to JefTerson to remember that the tariff was lower then than
it has ever been since. The ratio of that tariff to ours is roughly that of fifteen
to forty. The similarity between the views of Jefferson and the ideas of
modern protectionists who favor distribution is one of principle. Those, how-
ever, who are familiar with Jefferson's views, may well doubt whether he would
have advocated such a measure under the conditions now prevailing. He kept
his constitutional objections to distribution and to national appropriation for
improvements, etc., till the end of his days. As late as 1825 he repeated in his
letters his conviction that a constitutional amendment was necessary to provide
for such cases. — 73 Niles, 264.
« Adams' "Gallatin," 352.

SURPLUS REVENUE. 5

Jefferson still expected in 1808 a surplus soon after freedom of
commerce should be restored ; but freedom of commerce was not
restored, the Embargo Act was followed by the Non-Intercourse
Act, and in 1809 Gallatin announced a deficit.' The trouble in-
creased rather than lessened, and war soon followed.

It is in 1S16 and 181 7 that we next hear of excessive revenues.
The large importations which succeeded the long period of re-
striction produced "a casual surplus of five or six millions." It
was unexpected and was quickly and extravagantly spent ; but it
was before the eyes of Congress long enough to arouse expecta-
tions of more, so that twenty millions were disposed of " upon the
strength of these six millions." ^

A season of distress soon followed, during which the Govern-
ment had to borrow.

At this time, too, the distribution theory appears again in a
modified form. After the charter of the Second United States
Bank, a bill was brought forward providing that the dividends on
the seven millions of stock in the bank, owned by the General
Government, as well as the bonus which the bank paid for its
charter, "should be expended in each State respectively in propor-
tion to the number of its inhabitants "; and secondly, that " the
money should be applied in constructing such roads, canals, and
so forth, in the several States, as Congress might direct with the
assent of the State." ' This measure, commonly known as the
" Bonus Bill," was vetoed by Madison on constitutional grounds.*

During the following ten years there was an annual " surplus of

1 revenues over all expenditures of from two to six millions of

j dollars." ' But this excess was steadily applied to the payment of
1 • ~ " ~~~

' Ibid., 412.

"In 1827 Mr. Dickerson, of New Jersey, said that this surplus " produced an
effect upon the body politic something like that produced in the human system
by the pressure of blood upon the brain, — it produced a political vertigo, the
effects of which may still be seen and felt." — 3 G*ales and Seaton, 214.

^ 4 Webster's Works, 514. * 12 Niles, 36 and 67.

^ Knox, 167. Mr. Knox's interesting and valuable study of the distribution
of the surplus was not published till after this work was written, but I have
availed myself, where it was possible, of some of his facts. His chapter treats
one or two points at much greater length than I have done.

6 SUJiPLUS HE VENUE.

the public debt. By 1827, however, the country had become so
prosperous that visions of surplus revenues exceeding the charges
of the debt began to appear. As regards revenue the country was
then in much the same state as in 1805-6, or as at the present day.
The income exceeded the regular expenditures to a degree that
allowed large annual payments of the principal of the national
\debt. In 1827 the total extinction of the debt was sure within a
'dozen years ; now all the debt, which can be redeemed with advan-
tage, will be paid within three years, that is, by June, 1887.

In view of the similarity of the two periods, it is interesting to
note that in both cases long before the crisis the danger to the
tariff was foreseen, and very similar schemes were devised to
save it.

On the 13th of December, 1826, Mahlon Dickerson, a Demo-
cratic Senator from New Jersey, introduced a bill prescribing that
$5,000,000 a year, taken from the Sinking Fund, should be dis-
tributed for four years among the States in the ratio of direct
taxation, beginning January i, 1828, and ending January i, 1831,
He prescribed no especial use to which this money should be
applied, but the object was to aid internal improvements and
education. If the plan worked well, it was to be made perma-
nent ; after the payment of the debt, the amount for yearly dis-
tribution would be $15,000,000. '

Mr. Dickerson tried to bring his bill up again January 30th,
and he succeeded in so doing February ist, when he supported
it in a long speech.

He advocated distribution because the debt would shortly be
paid at the existing rate, when either the country would enter
upon a career of extravagance, or duties would be most suddenly
and disastrously reduced. Furthermore, distribution removed
the temptation for the National Government to spend its funds
on internal improvements, which action was both contrary to the
genius of our Government, and creative of bad patronage and
corruption. He also advocated an excise tax on domestic spirits ;

' 31 Niles, 260. See also Thompson, " Relief of Local and State Taxation,"
p. 12.

SURPLUS REVENUE. J

for the States, being forbidden to lay imposts, and not daring to
lay excises for fear of driving away industries, were forced back
upon direct taxation, an odious method by which it was difficult
to get revenue enough for education and internal improvement.'

The bill was laid upon the table, on motion of Mr, Benton.^
Though the measure was brought up again December 17, 1827,
and ordered for a second reading, nothing further came of it.
In reference to this proposition, Calhoun stoutly and rightly main-
tained that the chief object in view was to protect, strengthen,
and perpetuate the protective system." The plan, notwithstand-
ing the two defeats, was still cherished. In the following March,
iMr. Johnston, of Louisiana, in the course of some remarks on a
resolution of Senator Benton's, in reference to the public debt,
affirmed that if there should be a surplus, he was in favor of in-
ternal improvements on a large scale. If this should not meet
the favor of the people, he greatly preferred the distribution of
the surplus among the States to the abolition of duties. " If the
distribution," said he, " was for no other purpose than to levy a
fund for the support of the State governments, it would be infi-
nitely preferable to the abolition of duties." "

The next proposal to distribute the surplus came from a man
who afterwards repented having made it. Jackson, in his first
message, December, 1829, discussed the prospects of a surplus
revenue, which he expected would soon exist,' as no satisfactory

' 3 Gales and Seaton, 210. It will be seen, by comparing Prof. Thompson's
discussion of this plan (Relief, etc., p. 12) with his own plan, that the Demo-
crats of 1827 occupied the same position in several respects now held by the
Penn. Republicans. The proposition to levy an excise on spirits, to increase
the sum for distribution, recalls Mr. Blaine's proposition.

^ 31 Niles, 268.

}: Calhoun's Works, 53 and 573.
\^9 Benton's Abridgment, 537.

' Secretary Ingham, in his Treasury report, at the same time estimated a
surplus of income over expenditures of twelve million dollars yearly for the
next five years. As the amount of debt which would be payable or fall due in
this period was only $48,522,869, there would be a surplus, after paying this
indebtedness, of about twelve million dollars. This indebtedness was all paid
January i, 1833. During 1833 the debt had to be bought at market prices.
Knox, 168 and 178.

8 SURPLUS REVENUE.

adjustment of the tariff seemed possible. On account of the
doubtful constitutionality of national improvements, he considered
that "the most safe, just, and federal disposition which could be
made of the surplus revenue would be its apportionment among
the several States, according to the ratio of their representation ;
and that should the measure not be found warranted by the Con-
stitution, it would be expedient to propose to the States an
amendment authorizing it." ^

A year later his mind had begun to waver ; after noting that
unequal distribution of funds for internal improvements would
cause irritation and log-rolling, he went on to say that he had
previously recommended some plan of distribution of any surplus
among the States in proportion to their representation, to be ap-
plied to internal improvements. Although this plan had met with
favor in some quarters, objections had been brought up that the
/ratio of allotment was unfair ; that such a procedure would en-
courage oppressive taxation ; that the plan would bring about im-
provements of a local rather than of a general nature ; and, lastly,
that the States would become discreditably and injuriously depen-
dent upon the federal power.^ The principal alterations proposed
by the critics of Jackson's plan were two. Some proposed that the
importations of a district should be the standard by which the
share of any district should be calculated, while others proposed
the relative area. It is perfectly apparent that the first proposi-
tion came from Eastern men who regarded the surplus as the
product of duties, while the second is no less apparently the sugges-
tion of Westerners who looked upon the surplus as made up of
the proceeds of the sales of public lands. Each district proposed,
too, a method by which it might get more. Jackson defended
his plan as one of obvious equity, because of its being the ratio of
contribution whether the funds were derived from the customs or
from direct taxation. But the equity is not at all obvious. In
I the first place, the surplus was not raised by direct taxation ; and,
' secondly, the impost duties can not be said to bear upon a com-

i ' I Statesman's Manual, 705.
^ " I Statesman's Manual, 740-1.

SURPLUS REVENUE.

munity in proportion to its representative population. Jackson
himself acknowledged later the unfairness of the ratio. Further-
more, the results of raising a revenue by imposts, and of distributing
it by any ratio based upon population, would be very different in
different communities. Take South Carolina and Pennsylvania
in old times, and suppose the surplus to have been raised by a
high protective tax on commodities made in Pennsylvania. The
surplus is then divided on a ratio of direct taxation or of popula-
tion between the two States. But the agricultural State has paid
a tax to the manufacturing community on the home-made goods
it may have bought, which does not come into the calculation.
The result is, roughly, Pennsylvania would get two bounties and
pay one. Her people would pay part of the imposts and get
part of the surplus and the excess of price on their commodities
arising from protection. South Carolina, on the other hand, would
get one bounty and pay two ; for she would pay impost duties to
the Government and a tax to the people of Pennsylvania, and she
would receive her share of the surplus.

In a measure this inequality, would have been balanced, in those
times, by the Southern States receiving an allowance, on the basis
of direct taxation, upon two thirds of their slaves. If the sur-
plus had been raised by direct taxation, its division among the
States on the same ratio would be as nearly just as is possible, but
the justice vanishes if the money is divided per capita or among
the towns afterward. In short, there is no conceivable way of
collecting taxes and distributing the proceeds according to the
contribution. The minute such a method were discovered it
would be no object for anybody but the tax-gatherer, an unpopular
minority, to propose taxation.

Jackson henceforth recommended economy and reduction of
the tariff, and his annoyance at having countenanced distribution
grew, till he declared that his views had so changed that he could
give no sanction whatever to any such scheme.^

The seed, however, had been sown and was now springing up.
The suggestion of Jackson, or of Senator Dickerson was reechoed

' In Dec, 1836. See p. 20.

lO SURPLUS REVENUE.

in 1 83 1 by the Legislature of Pennsylvania, which passed almost
unanimously a resolution in favor of distribution.'

The first notable Congressional discussion of these projects
came up in the spring of 1832, under the leadership of Henry
Clay, who continued to advocate the distribution of land revenues
for many years.

The design, at bottom, was to maintain a high protective
tariff, but this was very difficult to accomplish in the face of a
fast diminishing debt and rapidly increasing land revenues. Clay,
therefore, devised a plan to distribute the land revenues, and thus
by withdrawing them from the treasury to make a high tariff
necessary. But who was to report such a bill? It came within
the duties of the committee on public lands, of course, but nothing
could be hoped from that body, as it was made up of Senators
from the new States, who were not particularly interested in the
welfare of the "American System," and were probably hostile to
the scheme in question, for the new States desired the cession of
the public lands to themselves. This difhculty, however, was
cleverly met by getting a resolution passed, under the color of
considering a revenue bill, that the Committee on Manufactures
should report on the land question. This cunning device did not
work, for though the Committee on Manufactures responded,
as might have been expected,' with a report and a bill favoring dis-
tribution,^ it was all so clearly out of place that the Chairman of

1 Prof. Thompson, "Relief," etc., 14.

^ Four out of five of tlae committee "were known to be devoted advocatesof
the 'American System,' " while the Chairman was Mr. Diclcerson, who had pre-
sented a distribution bill in 1827. Clay, too, was a leading member of the
committee. (11 Benton's Abridgment, 431.)

* The chief point of the report is in the following : " After deducting the ten
per cent, proposed to be set apart for the new States, a portion of the committee
would have preferred that the residue should be applied to the olijects of in-
ternal improvement, and colonization of the free blacks, under the direction of
the General Government. But a majority of the committee believes it better, as
an alternative for the cession of the new States, and as being more likely to give
general satisfaction, that the residue be divided among the twenty-four States,
according to their federal representative population, to be applied to education,
internal improvement, or colonization, or to the redemption of any existing debt

SURPLUS REVENUE. II

the Committee on Public Lands moved that the bill be referred to
his own committee, which was immediately voted, though a
majority of the Senate were in favor of the bill/

The Public Lands Committee reported against the measure. It,
however, passed the Senate after much debating, but was killed in
the House by a small majority.''

In the following winter Mr. Clay introduced his bill again ; it
passed the Senate the 28th of January by a vote of 24 to
20, and the House, with some amendments, March ist, by 96 to
40, only to receive a pocket veto from the President. This he
supplemented, however, with a special veto message at the open-
ing of the following session.'

Questions of greater moment, such as the bank war, the re-
moval of the deposits, and the relations with France, now arose
to push distribution for a time into the background.

contracted for internal improvements, as each State, judging for itself, shall
deem most conformable to its own interests and policy."

' I Benton, 275-76.

"^ I Benton, 279.

' See I Benton, 362-9.

CHAPTER II.

THE GROWTH AND DISPOSITION OF THE SURPLUS.

It was a favorite proposition with Mr. Calhoun, that the tariff
of 1828 was the cause of the surplus, and the surplus of the re-
moval of the deposits, whence followed the disasters in the cur-
rency, which befell the country in 1837. '

The operation of a high tariff in making a surplus is clear
enough, but there was a secondary influence after this which
vastly increased the surplus in a way not so clear. The secondary
influence was the new method of managing the public deposits.
When the Second United States Bank was incorporated in 1816,
its charter provided that the deposits of public money should be
kept in it, or its branches, unless the Secretary of the Treasury
should direct otherwise, in which case he was to report the
reasons of his action to Congress as soon as possible.

Of this valuable privilege Jackson resolved to deprive the bank.
This resolution was carried through with all his characteristic ob-
stinacy and recklessness, and the execution of it, with the attend-
ant circumstances, was one of the most exciting incidents in the
history of American politics.
j To this removal ^ of the deposits to certain chosen and favored
\ banks in different parts of the country, may be traced the source
of the enormous surplus which accumulated in 1836.

1 3 Calhoun's works, 428-g.

" There was no physical removal. Future receipts were to be deposited in
the chosen banks, and the deposits in the United States Bank remained there
till drawn out for ordinary government disbursements, (i Benton, 373.) In a
speech, April 27, 1836, Mr. Benton said : " No part of the revenues of 1833 was
ever transferred to the deposit banks ; all remained in the Bank of the United
States until expended." {50 Niles, 205.) The removal is fully discussed by
Prof. Sumner : " Life of Jackson," 297-321.

SURPLUS KE VENUE. 1 3

The proceeds from the sale of the public lands were the largest
item in the Government income, after the customs. Credit on these
sales was withdrawn between 1820 and 1832.'

The annual income from this source averaged 2.3* million dol-
lars in the ten years preceding the removal, /. e., from 1824 to 1833.
The excess of the receipts of 1833, under a credit system, over
those of 1832 was 1.3 million dollars. In 1834 the increase was
only .9 million dollars. The influence of the deposits had not
begun to be felt, because they had not accumulated fast since the
reduced tariff brought in 12.8 million dollars less revenue than
was received the previous year. But in 1835 the effects of the new
deposit system appeared ; the debt had been paid, and " an im-
mense amount of capital was being collected by taxes, and this
was being distributed to favored corporations, as a free loan for
an indefinite period, on which they could make profits by lending
at interest." ' Furthermore, these favored corporations were en-
couraged by the administration to extend their accommodations so
that people might not miss the help of the United States Bank,
which narrowed the range of its operations on the removal of the
deposits.

The extraordinary privileges which the "pet banks" enjoyed'
were eagerly sought for, and frequently granted as rewards for
political services.*

' Wirth, 145.

^ Five figures omitted.

* Prof. Sumner's Jackson, 319.

^ For example : The pet Commercial Bank of Cincinnati did a discount
business of nearly $4,000,000. It had $1,000,000 capital and $2, 500,000 /«3//<;
money. From auditor's report from Cincinnati Gazette, in Nezo York Spectator,
April 7, 1837.

' See the letters in 52 Niles, 91-3. To take an example : The president
of the Seventh Ward Bank, in New York, offered the services of the bank to
the Secretary of the Treasury, October 2, 1833. The letter contained the
following: "The directory feel much confidence in this application, being
(without exception), as well as the stockholders, with few exceptions, friends of
the administration." ..." The directors, having the highest personal
consideration for General Jackson, respectfully request the Secretary to lay this
letter before the President." This ofifer was not accepted, whereupon, De-

14 SURPLUS REVENUE.

There is no question that this tempting bait was used to
strengthen the hold of the administration on the Government.
New banks sprang up everywhere to partake of the good things.
The banking capital of the country in 1820 was $102,100,000 ;
in 1830, $110,000,000 ; in 1834, $196,250,000 ; and in 1836,
August, $281,250,000.'

The payment of the public debt left foreign capital seeking
investment, and at the same time raised American credit to a
high place ; consequently much of the foreign capital was put
into state stocks.'' This made money cheap and plenty, besides
inciting the States to contract debts for internal improvements.
' In the West particularly the banks which received deposits
sought to loan them on easy terms, and so men found no trouble
in borrowing. The new banks, at the same time, were putting
out notes with great recklessness.' These two influences worked
together to excite a fever of speculation. The improvement
scheme would raise land values ; but the public lands sold for
the fixed sum of $1.25 per acre, no matter how high the market
price of other land rose.

Consequently everybody who could borrow money bought
public lands to sell again at the market value, or to hold for a
further rise.* In this way the deposits were borrowed, paid over

cember 16, 1S33, the president, cashier, and twelve directors sent the following,
signed with their names : " We, the subscribers, officers, and directors of the
Seventh Ward Bank, in the city of New York, friends of the administration,
and of the revered chief at the head of the Government, do solicit a portion of
the fiscal patronage of the United States Treasury for the Seventh Ward Bank.
The terms are those most favorable to the Government." This appeal was
successful.

^ 51 Niles, 162.

"^ E. g. : In 1842 the debt of Pennsylvania was $34,454,356.47, of which
$23,738,206 was held abroad. — 62 Niles, 332.

^ Abbot Lawrence, in March, 1837, estimated that since the veto of the bill
to renew the charter of the U. S. Bank in 1S32 there had been an increase of
bank notes in circulation of $80,000,000. — 52 Niles, 89.

* " A gentleman purchases land at $1.25, or more, per acre, returns, repre-
sents it a first quality, and counts it worth from $10 to $15 or $20. Multi-
plying the number of acres by this amount, he finds out his real wealth, and

SURPLUS REVENUE. I 5

to the land receiver for land, to be by him deposited in the banks ;
then the operation was repeated again and again, the growing
surplus consisting of bank credits mainly.'

Under this deceptive process the land sales rose from an aver-
age of $2,300,000 a year to 114,757,600 in 1835, and in 1836 to the
unparalleled amount of 124,877,179 ! All this time speculation in
other things besides lands, feeling the contagion, went on wildly,
fancy stocks were put on the market, city lots rose enormously in
value, and money was drawn out of slow-goingenterprises. The rise
of prices here increased importations of all kinds, even'of provisions.*

the amount so produced stands good for credit equal to it; an endorser is easily
found, for in these speculating times dependencies are mutual, and the bank
looses its purse strings. The investment is made as soon as possible. The
money thus obtained cannot be refunded. Land will not sell, and if sold, the
depreciation in value prevents its realizing the estimate. In this way is the
ruin of many, no doubt, involved, and the banks must meet with heavy losses."
— The Richmond Compiler in the N'ezv Haven Register, May 13, 1837.

' "The facility of purchasing was not less than the quantity to be purchased
(about 200,000,000 acres). The deposits of the Government in the State banks
selected as its fiscal agents were upwards of forty millions of dollars [this
estimate is a little too high probably, except toward the last. October i, 1835,
the deposits amounted to $18,000,000, and October i, 1836, to $41,000,000],
consisting almost exclusively of bank notes. From this vast source speculators
and political partisans drew their funds, in the form of discount or loan, in
exchange for which they gave their own promissory notes, and received the
notes deposited by the Government, or what was the same, a credit in bank
founded on them. These, in turn, were exchanged for public lands, when they
passed into the hands of the receivers, and were by them returned to the banks
as new deposits, to take the same rapid round again and again, and sweeping
away from the people, by means of their own funds, a corresponding amount of
their land, and swelling, in the same proportion, the amount brought to the
credit of the Government by the banks, under the fallacious name of public
money in the treasury, but which in reality was nothing more than the notes in
bank given by speculators and partisans in exchange for the public lands." —
Anonymous " Life of J. C. Calhoun," p. 56, Calhoun himself gave a rapid
and vivid survey of this period, and of this process, in his speech of February 5,
1840, 3 Works, 428-9. See also Mackenzie's "Van Buren, 136 (note) ; Jack-
son's Message, Dec, 1836, 51 Niles, 235 ; Von Hock, 424-5. and 50 Niles, 351.
"^ " For a series of many years the value of the grain and flour imported did not
exceed a few thousand dollars, while that exported was, on an average, quite

1 6 SURPLUS REVENUE.

The revenue from customs was $16,200,000 in 1834, $19,400,-
000 in 1835, and $23,400,000 in 1836, a higher figure than was
reached again till 1844, after the tariff was raised. March i, 1836,
the surplus on deposit amounted to $33,700,000,' and by June ist
it had risen to $41,500,000.'^ The further inflation of this credit
surplus ^ was stayed by the specie circular which took effect Au-
gust 15th, so that on the first of January, 1837, the actual surplus
was $41,468,859.97.'

From these considerations it appears that the verdict of a con-
temporary writer, that there would have been no surplus had there
been no removal of the deposits, has very strong grounds of proba-
bility in its favor. It would perhaps be too much, though, to ac-
cept this statement without a little modification. To quote his
own words : " had the deposits not beeti removed there could have
been no surplus revejiue. It was the act of sending part of those
deposits to the Western States which furnished the means for the
first speculations in public lands. The public money was lent to
persons to buy lands with, and the same identical money, being
returned to the deposit banks by the receivers, was loaned over
and over again, until the amount was upward of forty-four mil-
lions of dollars in three years, being seven millions more [really $16,-
000,000 more] than the amount distributed amongst the States." ^

To give another exa'mple of the extent of this speculative buy-

$6,oco,ooo. Sometimes it exceeded even $14,000,000, and so late as 1833, '4, and
'5, amounted to nearly $5,000,000 annually. But in the year ending September
30, 1837, the exports of grain fell off nearly a million, while the imports were
augmented in value to the unprecedented amount of more than four and a half
millions." See Woodbury's Report, Dec. 5, 1837 ; 53 Niles, 242. Between
January i and April 19, 1837, 851,000 bushels of wheat were imported. — 52
Niles, 147.

' 50 Niles, 91. ^ 50 Niles, 313.

^ The term " credit surplus," used above, is authorized specifically by the
chairman of a legislative committee in South Carolina, organized to report on
Independent Treasury. He referred to the late surplus as one " consisting of
bank credits." — 55 Niles, 310. ■* 51 Niles, 289.

* "An Examiner" in the National Gazette, April 29, 1837. — i Financial
Register, 146. The fact that Raguet reprinted this series of articles is a testi-
mony to their trustworthiness. See Appendix of this work.

SURPLUS REVENUE. 1/

ing : in Michigan the sales in 1836 exceeded $5,000,000, but in
1838 they amounted to only 1154,284 ; in Mississippi, in 1835 and
1836, the receipts exceeded $3,000,000 each year, but in 1838 they
fell to %C)(>,6i(i.^ It is worth remarking that the ratio between the
receipts in these two States is the same in both periods. It will
be noted further on that when the distribution took place the de-
posits were not forthcoming from Michigan and Mississippi,
because the banks could not collect their loans.

During 1835 and the first part of 1836 the opposition party
looked with alarm at the growing surplus of many millions of dol-
lars kept in administration banks, which had the use of the capital
for nothing.

The opposition perceived that the system was exciting wild
speculation, and that by it money was drawn from the great com-
mercial centres and stored in remote banks to be loaned to
the profit of those who had proved their loyalty to the administra-
tion and its " revered chief." The Whigs felt they had no hopes
of gaining an election against such odds^ ; what was to be done,

1 Woodbury's Report, January, 1840.

''Mr. Ewing, of Ohio, said in a speech in the Senate, March 17, 1836 : " I
could not but be struck, and forcibly, with the perfect control which the Execu-
tive has, if he see fit to exercise it, over all these banks, and with them, also, over
the whole long list of directors, stockholders, and debtors. Of the thirty-five
banks in which the public money is deposited, there are but eight which could
not be crushed at once, if the public deposits should be at once withdrawn from
them. There are twenty-seven of them that could not pay the amount of those
deposits on demand, even if no other creditor should call on them. They are
fettered, bound by a golden chain, the ring of which is in the hands of the Secre-
tary of the Treasury. They could not, and they dare not move contrary to his
bidding, if he see fit to direct them to any end or object." — 50 Niles, 119.

In this session a committee, consisting of Calhoun, Webster, Benton, Bibb,
Southard, and King, considered the surplus question. It assumed there would be
a surplus of nine millions a year for the next eight years, and to dispose of this
surplus they proposed an amendment of the Constitution authorizing the distri-
bution of the yearly surplus on the basis of representation. This proposition was
never brought to a vote. Benton, as the leader of the administration in the Sen-
ate, opposed it, as was natural, for it was a blow aimed at the increasing power
of the administration coming from the support of the pet banks. For a fuller
notice of this report see Knox, 175-6.

V/cstminster Odd Fellows'

Free Library and Reaa-.^oom •

WESTy,lNSTER, CALlFORNm

I 8 SURPLUS REVENUE.

for something must be done right quickly ? January 27, 1836,
Mr. Ewing, for the Committee on Public Lands, reported in favor
of distributing the proceeds of the land sales among the States, for
a limited time, to be devoted to education, internal improvements,
etc. There was too much revenue, and the best plan was to give
it back to the people.'

Clay brought forward a land bill which set apart ten per cent, of
the net proceeds of the land sales for the ten new States, and pro-
vided for the distribution of the residue.^ Calhoun, who was in
opposition, presented a joint resolution for an amendment to the
Constitution sanctioning distribution, ^and also a bill to regulate the
public deposits. A distribution bill was introduced. Mr. Benton
favored spending the money on fortifications ; for the administra-
tion did not relish the effects of the surplus and the responsibilities
it entailed. Silas Wright thought it would be a good plan to buy
State stocks with the surplus. Mr. Grundy introduced a bilP to
use it to secure for the Government the freedom of the railroads —
/. e., free transportation of mails, munitions of war, etc., forever-
Nobody of importance suggested a reduction of the tariff, because
the compromise bill, which was working slowly, was regarded as
the settlement of that question for some years to come, and it
must not be interfered with. In fact, many looked upon it as
a sort of temporary appendix to the Constitution, and conse-
quently sacred. Furthermore, most of the opposition were protec-
tionists. But perhaps the chief reason was that it was the vicious
deposit system and not the tariff which was working the mischief.

The land bill after passing the Senate, May 4th, by a vote
of 25 to 20, was laid upon the table by the House, 104 to 85,
June 22d. Through Webster's ^ influence the Senate committee
added a clause to the deposit bill providing for the division
among the States, according to population, of the excess of
the revenue above, some amount thereafter to be reserved,

^ 50 Niles, I and 12. The surplus at this date exceeded thirty millions.
^ March 25th, the lower house of the General Assembly of New York passed
a resolution in favor of the distribution of the land revenue. — 50 Niles, 118.
' See note 2 on p. 17.
^ 50 Niles, 83. * 50 Niles, 235.

SURPLUS REVENUE. 1 9

The bill was thus amended and passed the Senate, June 17th.
On the 20th it was considered in the House, and an attempt was
made to break it up into two bills ; one for the regulation of the
deposits, and one for the distribution of the surplus, but without
avail. It was then made the order of the day until it should
be disposed of. After many hours of debate on the 21st the dis-
tribution clause was stricken out, and, on the motion of Mr.
Anthony, of Pa., a clause inserted in its place, making the States
merely the depositaries of the surplus, which should be subject to
the demands of the Treasury ; and changing the ratio of division
from the ratio of population to the ratio of representation in Con-
gress. In this shape the bill passed, 155 to 38. The Senate imme-
diately accepted the amendments, and the President signed the
bill on the 23d of June.^

' Two days later Webster wrote : " The deposit and distribution bill has be-
come a law, and money is already getting to be much easier, as the phrase is." —
2 Webster's Correspondence, 21^

The following is the text of the 13th section of the Deposit Bill : ''And be it
further enacted. That the money which shall be in the Treasury of the United
States on the first day of January, 1S37, reserving the sum of five millions of dol-
lars, shall be deposited with the several States, in proportion to their respective
representation in the Senate and House of Representatives of the Congress
of the United States ; and the Secretary of the Treasury shall deliver the
same to such persons as the several States may authorize to receive it, on receiv-
ing certificates of deposit, signed by the competent authorities of each State,
each for such amount and in such form as the Secretary of the Treasury
may prescribe, which shall set forth and express the obligation of the State
to pay the amount thereof to the United States, or their assigns ; and which said
certificates it shall be competent for the Secretary of the Treasury, in the name
and behalf of the United States, to sell and assign, whenever it shall be neces-
sary, for want of other money in the Treasury, to meet appropriations made by
Congress, all sales and assignments, however, to be ratable, and in just and equal
proportions, among all the States, according to the amounts received by them
respectively ; and all such certificates of deposit shall be subject to, and bear an
interest of five per centum per annum, payable half-yearly, from the time of
such sale and assignment, and shall be redeemable at the pleasure of the States
issuing the same."

The 14th section prescribed that the deposits were t8 be made in four instal-
ments, one quarter January ist, April 1st, July 1st, and October ist respec-
tively.— 50 Niles, 291.

20 SURPLUS REVENUE.

There is no doubt that Jackson would liave vetoed a distribu-
tion bill. The Globe said so/ and his criticisms of the act showed
that he was dissatisfied with it as it stood.

Indeed, his mind had undergone a thorough change on the sub-
ject. He declared in his message of Dec, 1836, that his first two
messages had been misunderstood ; he had wanted to discourage
loose construction and big appropriations for internal improve-
ments, at a time when duties could not be reduced without exten-
sive mischief, while great evils attended keeping the surplus in the
Treasury. He had suggested an amendment to the Constitution to
authorize distribution as an alternative for what were deemed
greater evils, as a temporary resort to relieve an overburdened
Treasury, till without commercial disturbance the Government
could return to raising revenue just sufficient for its support.

Even this had not been proposed as advisable without a consti-
tutional amendment. He now considered distribution of surpluses
as prohibited by the Constitution ; his opinion had changed till
he did not approve of an amendment at all. The whole thing
was bad, worse than any transient mischief coming from lowering
duties.^

' 50 Niles, 281.

"51 Niles, 234. In the message he argues very fully and strongly against dis-
tribution and against the deposit bill.

CHAPTER III.

THE DIFFERENT OPINIONS OF THE MEASURE.

There can be no question legally that this act of June 23d was
to be interpreted as merely a temporary deposit of the surplus
with the States ; such is the wording of the act and such has been
the decision of the Supreme Court," yet the distributionists then
and afterward regarded it as a substantial victory, and their
opinion has so far prevailed that ordinarily the surplus is far more
often said to have been distributed than deposited in 1837. Many
States, indeed, continued for several years to count the deposit
among their liabilities, though oftentimes with the remark that it
probably would never be called for. Mr. Clay told his fellow-
citizens, on his return to Kentucky, that he "did not believe a
single member of either house imagined that a dollar would be re-
called." ' In 1841 he reiterated this belief more emphatically.^
On the other hand, Calhoun (1841) affirmed: "I regarded it
then (1836), and still do, as simply a deposit — a deposit, to say the
least, as constitutional as that in Stale banks or State stocks held by
speculators and stock jobbers on both sides of the Atlantic, and far
more just and appropriate than either. But while I regard it as a

1 See p. 43. '^ 51 Niles, 14.

' " The Senator from New York has adverted, for another purpose, to the
twenty-eight millions of surplus divided a few years ago among the States. Was
not that, in effect, distribution ? Was it not so understood at the time ? Was
it not voted for by Senators as practical distribution ? The Senator from North
Carolina (Mr. Mangum) has stated that he did. I did. Other Senators did ;
and no one, not the boldest, will have the temerity to rise here and propose to
require or compel the States to refund that money. If in form it was a deposit
with the States, in fact, and in truth, it was distribution. So it was then re-
garded. So it will ever remain." — Speech of January 28, 184 ; 6 Clay's
Works, 248.

22 SU2?FLUS REVENUE.

deposit, I did then, and now do, believe that it should never be with-
drawn but in the event of war, when it would be found a valuable
resource." ' Others asserted that the bill provided for a deposit,
rather than for a distribution, only to avoid a presidential veto.'

On the question whether it was constitutional to distribute the
surplus revenue or to raise revenue for distribution, the Whig
position was that the existing surplus was not raised by taxation
and was not properly revenue, but the property of the people,
which should be given to them. If the Government needed the
money it might use it ; otherwise the money should be paid to its
rightful owners, the people.'

These ideas are illustrated by the attitude of the party news-
papers.

The opposition press rejoiced at their victory, as they deemed
it, prophesied that the money would never be recalled because
it was the " people's money," ' or because the States ' would
not give it up. They pronounced any man who, for party reasons,
could vote against a bill which brought so much money into the

' Speech of Jan. 23, 1841 ; 3 Calhoun's Works, 581.

^ It cannot be denied that when the distribution was made, it was well under-
stood by Congress that the form of a deposit was adopted only to save the bill
from the veto of the Federal Executive. Nor is it less apparent that the several
Legislatures, in disposing of the funds deposited, by no means contemplated a
contingency in which they should be repaid to the General Government." — Gov.
Seward's Message, Jan., 1841.

He asked if the people of New York were going to withdraw from educa-
tional purposes four million dollars, to pay into a treasury which, if well man-
aged, overflowed with the tribute of their own commerce. — 2 Seward's Works,
267 ; 4 Hazard, 36.

^ Hartford Courant, in New Haveji Herald, March 13, 1S37.

* " It is the people's money, and the Government will never ask for it." —
Nc7v Haven Palladium, Dec. 3, 1836.

^ " We abjure, however, the idea that the National Government ever will, or
can, effectually call for its return — a fact which is so palpable in itself that a
motion has already been made in Congress to divest the question of any kind of
doubt, (See page 29.) The idea is ridiculous that it can ever be returned in a
mass."

If all the States were called upon, they would not all act, an inequality with-
out remedy. — Nezv Haven Herald, Dec. 15, 1836.

SURPLUS REVENUE. 23

State, politically depraved/ and declared that the country was
deeply indebted to Webster and the Whigs.*

Some papers asserted that the only reason why the administra-
tion, and especially Van Buren, the coming President, disapproved
of distribution was because it took money out of their control that
they wanted for political managing and electioneering purposes."
On the other hand the Giol'e claimed the credit of the deposit
bill for the administration in the early part of 1837, a claim which
the opposition papers refused to allow at all, and which the Globe
abandoned as soon as some evil effects of the measure began to
appear.

But notwithstanding the heat of these newspaper discussions we
are constrained to believe that there was no lively popular feeling
on the subject.'' While the politicians and the press wrangled as
to who should receive the credit of having benefited the country,
the people took no interest in their rival claims, and, so far as the
measure may have been calculated for winning political capital, it
must have been unsucessful. Before we criticise the deposit bill
too harshly or show that it failed to satisfy the expectations it

^ The bill " will bring into this State, at the lowest calculation, $496,000;
at the highest, $544,000. A Senator or Representative who could bring himself
for mere party grounds to vote against a proposition, the result of which must
be so favorable to the most important interests of his constituents, must have
been far gone in political hardihood as well as depravity."

Cotin. (Hartford) Cotirant, June 27, 1836. " The country," it said, " is in-
debted to the public spirit, clear discernment, and distinguished talents of the
Hon. Mr. Webster, of Mass."

^ " We are well aware that the Tory Democrats have fought against the meas-
ure of distributing the surplus among the people, so long as they thought it of
any avail, and that to the Republican-Whig Party alone are the States indebted
for the benefits arising from the distribution of the accumulated millions in the
National Treasury of the hard earnings of the laboring classes."— Bn'ifge/ort
Republican, in the New Haven Palladium, Jan. 28, 1837.

^ Conn, Coiirani, Dec. 14, 1836, and N. H. Herald, March 20, 1837.

^ " The public feeling is scarcely enlisted yet in support of our noble and just
measure of distributing the public revenue. People, seem so far as they fall
within my observation, to be unconcerned, as if entirely ignorant on the sub-
ject."—Letter from W. H. Seward, Sept. 8, 1836, from Westfield, N. Y., where
he was a land officer. Life of Seward, 307.

24 SURPLUS REVENUE.

raised, let us look at the predicament. Private corporations were
using Government deposits as capital for their own profit ; this
great privilege was a reward for party services ; the wide and
powerful influence exerted in favor of the administration by this
system aroused the Whigs from mere party motives, if for no other
reason, to put a stop to such abuses. At the same time it was not
simply a case of unfair use of advantages seized in an unfair and
despotic way, but the policy was exceedingly disastrous com-
mercially and socially ; all monetary relations were disturbed by
arbitrary apportionments of the capital of the country and wild
speculation was undermining the solid basis of industry. Every
one felt that something must be done. Tariff revision was im-
practicable. Mr. Benton proposed, without success, to require all
payments for public lands to be made in specie ; this touched the
heart of the difficulty, it would check the growth of the surplus,
but it would not remove the money from the control of the
administration, a vital point with the opposition. All that this
could have done was done later by the " specie circular," ' an
heroic measure which struck at the root of the disease, but the
shock of whose execution hastened a crisis. Investment of the
money in the swollen issues of State stock would have been
to throw it away, and at the same time to tempt the States to
further issues. Webster regarded the deposit bill as a necessity to
prevent the accumulation of revenue ; building fortifications
would not do all ; he should vote, he said, for every part and
parcel of the fortification bill, yet he was sure it would not absorb
the revenue ; internal improvements could not absorb it, for these
useful channels were blockaded by vetoes. How then was it to be
disposed of P'^

Calhoun maintained that it was highly dangerous to make way
with the surplus by increased expenditures, but more dangerous
still to leave it " in the custody of a few monopolizing corpora-
tions," selected by the Executive, which used the money as their
own while it was in their possession. This arrangement placed an

'See p. 27.

"Speech, March, 17, 1836; 4 Webster's works, 236.

SURPLUS REVENUE. 25

overwhelming power in the hands of those who controlled the
Government, He could not favor buying State stocks. The
deposit probably would not be recalled except perhaps in time of
war. Tlie Electoral basis favored the smaller States, which he
wanted to do. Depositing, in short, would avoid national ex-
travagance ; would avoid diverting so much capital to unpro-
ductive enterprises ; and would enable the States to discharge
their debts and finish their internal improvements.'

It was under the pressure of such feelings that Congress passed
the bill The act was a makeshift. It was not wholly satisfactory
to the Whigs, who wanted distribution. Some of the States of the
free-trade South received their shares with protests, and received
them only because if they refused the North would get them ;
others regarded the money as a slight return for the iniquitous
exactions of the tariff, but not to be despised though slight.
Generally those States looked upon the deposit as a sop thrown
them by the protectionists, while a few of them proudly asserted
that they could support themselves and were not dependent upon
the General Government. Though their feelings were bitterly
expressed, they are an honorable contrast to the insatiable greed
manifested in some quarters. The administration disliked the act,
but felt constrained to sanction it. But in spite of its unsatisfac-
tory nature, and in spite of its unhappy effects in some cases, it is
difficult to suggest any thing better. The act was preferable to
pure distribution, though it degenerated to that in some instances.
The verdict must be that the country was in a sad plight : reckless
financial dissipation had had its effect ; disease had so fastened
upon the commercial body that there was no way to health or
improvement except by a surgical operation. The operation was
clumsy, because it was the first of its kind ever performed ; it was
painful, because the disease was strongly rooted ; it was injurious,

* Speech of May 28, 1S36 ; 2 Calhoun's works, 534-68. It will not be
anticipating too much to remark that "depositing" was no real safeguard
against the evils mentioned in the last sentence, for it encouraged State ex-
travagance, diverted the capital in many cases into unproductive State enter-
prises, and while enabling the States to reduce their debts etc., it frequently
tempted them to contract more debts and to begin more reckless improvements.

26 SURPLUS REVENUE.

because the organism was so deeply affected that an attempt to
heal was only less dangerous than neglect. Our criticism and our
condemnation must be visited not upon the act so much as upon
the courses which made the act necessary.

CHAPTER IV.

THE SPECIE CIRCULAR — THE GROWING SURPLUS — SUCCEEDING
SURPLUSES, AND THE ACTION TAKEN BY THE STATES UPON

THE DEPOSITS.

The deposit bill had passed, but though it was directed against
the mischievous effects of the surplus it was not all that was
needed ; it would not begin to act for six months, and then it only
turned the current of the flood instead of drying up its source.
To do this the Secretary of the Treasury, by order of the Presi-
dent, after Congress broke up, issued the " specie circular," '
ordering that after the 15th of August nothing but gold and silver
and in special cases Virginia land scrip should be received in pay-
ment for public lands, " provided that till Dec. 15, 1836, the same
indulgences heretofore extended as to the kind of money received,
may be continued for any quantity of land not exceeding 320
acres to each purchaser, who is an actual settler or bona fide resi-
dent in the State where the sales are made." This measure was
only a return to a strict enforcement of existing laws ; but at a time
when credit was very general, so general as to be greatly abused,
to have the credit cease in just those transactions where it had
perhaps been most abused caused great annoyance and friction.
The opposition asserted that the measure failed to accomplish its

' It was dated July nth, and addressed "To receivers of public money and
to the deposit banks." It began: " In consequence of complaints which have
been made of frauds, speculations and monopolies in the purchase of the public
lands, and the aid which is said to be given to effect these objects by excessive
bank credits, and dangerous, if not partial, facilities through bank drafts and
bank deposits, and the general evil influence likely to result to the public inter-
ests, and especially to the great amount of money in the Treasury, and the
sound condition of the currency of the country, from the further exchange of
the national domain in this manner, and chiefly for bank credits and paper
money, the president," etc. — 50 Niles, 337.

28 SURPLUS REVENUE.

end, and that its effects were wholly evil ; Clay ' and Ewing
declared that it helped the speculators, for they could obtain
specie, and Ewing ' further objected that it would limit the sale
of land and raise the prices, an operation highly favorable to
speculators who had bought. But this could not be helped, and
it was absolutely necessary to diminish the land sales in some way.
The action of such measures is never pleasant, and the " specie
circular " was no exception. So great was the popular feeling,
however, that the Senate voted to annul the circular 41 to 5, and
the House 143 to 59, but the President did not sign the bill'

At the present time we must conclude that this popular objec-
tion was much of it unreasoning. The criticisms which economic
writers of to-day make are rather favorable than otherwise.*

During the latter part of the summer the people began to gird
up their loins for the Presidential campaign, and little interest was
shown about the surplus.

September ist, the money in the treasury amounted to $37,817,-
996.39 ; this added to the amount credited to public officers —
$4,847,926.55— made a total of $42,665,922.94 surplus revenue.'
Oct. ist this total was $46,610,131.77.' At this rate the sum to be
divided promised to be about $50,000,000, or about $3.75 for each
free inhabitant. This would be equivalent to-day to a distribu-
tion of $200,000,000. But these high expectations were not to
be realized. Nov. ist the two accounts stood at $42,600,000 and
$4,800,000, a gain in the total of only $700,000. By Dec, ist

' 51 Niles, 15.

''si Niles, 260.

^ 52 Niles, 26. The bill was sent to the President March 2d.

*Wirth, in his histoiy of the crisis, says : " This measure [i. e., the circular]
for a time had salutary effects. It restrained the action of the Western banks,
and at the same time increased in advance their resources against the pressure
which soon appeared in the money market of the commercial cities of the East
and of Europe. By lessening the extent of the credit system, it did away with
the means of excessive speculation, and worked to prevent the tendency to mo-
nopolize the best public lands." Wirth, 147. Prof. Sumner : Jackson, 335-7.
gives a concise but thorough criticism of the measure.

* 51 Niles, 2.

"51 Niles, 180.

SURPLUS REVENUE. 29

there had been a falling off of ^500,000, and by Jan. ist the
amount was still less, so that after deducting the $5, 000, 000 of
reserve there remained only $37,468,859 97 to be deposited with
the States.

Before considering the preliminary steps to the execution of the
deposit act which were taken by the treasury, it will be best to gather
up some threads of the narrative here, and so render our course
freer from digression hereafter.

Some Whig papers feared that the election of Van Buren would
put a stop to distribution, and they used his well-known opposition
to the scheme as a campaign argument. A specimen may be
quoted which will illustrate this feeling. In Connecticut Van
Buren had a majority of 620. The Connecticut Courant, in com-
menting upon this result foreboded that the longed-for distribution
would be prevented. "When that takes place," said the editor,
" it will be found that the people of the State have purchased the
privilege of being cheated and duped by selfish demagogues and
hungry horse-leeches dearly, by paying o?ie fnillion tivo hundred
t/wusajid dollars for being iniposed upon and degraded." '

The act of June 23d provided only for the surplus in the
treasury Jan. i, 1837. What was to be done with later surpluses ?
This question arose before the one on hand was fairly disposed
of, and long before it was known whether there would be another
surplus.

A well-known writer for the press — " Pro Bono Publico," —
hailing from Pennsylvania, suggested that the surplus be used to
redeem the Continental money, and thus to wipe away the stain
still hanging over it.^ This proposition aroused no marked dis-
cussion, but the general question received attention on the
opening of Congress. On Dec. 12th, Mr. Mercer, of Virginia,
moved a resolution to instruct the Committee of Ways and Means
to report a bill releasing the States from any obligation to return
any part of the surplus that they might receive. This bold step
toward pure distribution found many supporters, but was laid

' Conn. Cotirant, Nov. 12, 1836.

* National Intelligencer, Dec. I2, 1836.

30 SURPLUS REVENUE.

upon the table, 123 to 73/ A few days later Calhoun introduced
a deposit bill providing for the surplus on hand Jan. i, 1838,
which would amount, he thought, to eight million dollars. If such
a revision of the tariff as would prevent a surplus were feasible,
it would be best by all means to get it ; but in case this should not
be possible, it was far preferable to deposit the money with the
States than with the banks.^ Clay, too, had introduced by this
time his favorite land bill,^ but neither of these bills passel. Cal-
houn's was finally tacked on to a bill appropriating money for
fortifications ; in this shape it passed the House, but the Senate
refused the amendment, 26 to 19.' The House disagreed,
and the Senate insisted on striking out the deposit clause, 28
to 22.' Friday, March 3d, the Senate voted, 27 to 23, to
adhere to its objections to the deposit clause, and the bill was
lost by the House voting to adhere to the disagreement, 106 to
87."

During the late fall and winter the State Legislatures were busy
in disposing of the prospective funds. Their measures will be de-
tailed later, but this is the best place to show how perplexing the
work was, and how carefully the law-makers were watched by
those whose hands itched for the Government money. In many
cases special sessions were summoned at considerable expense, as
there was no little controversy as to the use to be made of the

^ 51 Niles, 255, and i Benton, 707.

"51 Niles, 309.

' I Benton, 707.

* 52 Niles, 6.

" JbicL, 8.

^ Ibid., 24. On this result the Washington correspondent of the Ne^o Haven
Palladium commented as follows : " The Senate has denied the request o£ the
Representatives that their own money be deposited with them, and has decreed
that it be left in the vaults of the deposit banks at two per cent, per annum
[the eleventh section of the act of June 23, 1836, provided that a deposit
bank should pay two per cent, interest a year on all the excess of its govern-
ment deposits over one-fourth its capital] when to the people it is worth two per
cent, a month."

It would be interesting to know how the correspondent, March 11, 1837,
knew that money would be worth two per cent, per month nearly a year later.

SURPLUS REVENUE. 3 1

money. In New Hampshire the discussion took up far more time
than the whole session usually occupied.'

In Massachusetts the question was discussed two or three months
off and on, and when the lower house of the Legislature voted 421
to I to distribute the surplus among the cities and towns, high
hopes were awakened in all children who were out of pocket-
money.^ The country towns especially were in favor of this pro-
ceeding,' and we read in the Boston Courier that most newspapers
also " seemed to be in favor of distributing this God-send to the
towns in proportion to the number of inhabitants." The Courier

' Gov. Hill, in approving the bill accepting and disposing of the deposit,
said : " With a Legislature composed of gentlemen scarcely less intelligent and
patriotic than any other public body that ever convened in the State, the people
will be surprised to learn that so great has been the agitation produced in antici-
pation of the surplus revenue for this State, that the important measures of the
session had not even been reported in that branch in which they are expected to
originate until long after the period when ordinary sessions have terminated." —
The Globe, Jan. 30, 1837.

In New Hampshire, a minority report was made against accepting the deposit.
See below " New Hampshire."

Mr Knox notes (p. 181) that the Legislature of N. H. by resolution declared
any distribution of surplus unconstitutional, and instructed their delegates to
vote against a relinquishment by the U. S. of the sums deposited, while the
legislators of Indiana pursued just the opposite course.

"^ This extract from the Boston Courier is interesting as showing the way in
which the topic was looked at by many. " The Western mail has just brought
us the following : ' To the Editor of the Courier : I have a little son, eight
years old, whom parental partiality might regard as a bright boy. He fre-
quently reads the newspapers, and is much interested in the disposition of the
surplus revenue in Massachusetts. He is decidedly in favor of its distribution
among the towns in proportion to their population, and is particularly anxious
about it now, as he is nearly out of pocket-money. Three dollars in his eyes are
a large sum for sugar plums, and he is sure if the towns get the money, he shall
have so much, whether father and mother are willing or not. Is he not a promis-
ing candidate for public favor ? Yours respectfully, WORCESTER.' "

Boston Courier, Jan. 19, 1837.

An acquaintance of the writer's was more fortunate in his childhood than this
little boy, for he lived in Maine, and still remembers getting between two and
three dollars from the town officers.

* 2 New Haven Register, Jan. 21, 1837.

SURPLUS REVENUE.

had first favored an investment in internal improvements, but some
of its contemporaries had replied that this would aid corporations
and individuals, and that not a farthing of the money would then
benefit the great mass of the people. If lent to the towns, the
benefit would be unequal ; why not, then, said the Courier, dis-
tribute it among the people ? It was true democratic doctrine, and
would bring each individual about $2/ At another time, when the
division among the towns seemed likely to be carried through, the
Courier very much regretted that Congress had not provided for
the distribution of the money. " The popular doctrine of distribu-
tion to the various counties in some States and to towns in some
others, is a very excellent one to give opportunities to political
demagogues to show their love to the people and help themselves
to a little popularity ; but such a disposition can be of no possible
benefit to the towns." In five years, not an individual in New
England would be able to tell whether it had been of the slightest
benefit. As for itself it preferred a ''per capita distribution of the
money ; then, at least, every body would get something." ' The
matter was not settled till the 21st of March.

In Connecticut a special session was called which met at New
Haven, Dec. 21st. The day before the session opened the ISleiv
Haven Herald, a lively little Whig daily, to give the law-makers
something to think about, pronounced dividing the surplus up
among the towns, which might use the interest but must keep the
principal inviolate, "about equal to throwing it into the flames."
It would be divided into two hundred and thirty-four parts, there
would be the same number of responsibilities, ten times as many
subordinate responsibilities when it was loaned, and who could
expect ever to scrape it together again ? It did not approve of
applying the funds to schools or to improvements, as all would

^ It continued : " If any one (like ourself, for instance) should have a number
of children— say a dozen, more or less— his share of the surplus would replenish
his pocket very comfortably — a consideration of no small weight in these days,
when breeches pockets are so degenerately empty. This case addresses itself so
vitally to every man's sensibilities that we look for a large majority on our
side." — Boston Courier ]a.n. 9, 1837.

* Boston Courier, Feb. 2, 1837.

SURPLUS REVENUE. 33

not then enjoy the advantages of it ; it would be best to use it
to pay the State tax. It should be accounted as a liability of the
State, though every man of common-sense could see that it would
never be called for/

After three days of discussion, the Herald declared it did not
know how the surplus business was coming out : " Both houses
seem to be acting 'upon their own hook,' It will probably result
something like the Seminole war, in which every general has
achieved a victory and retired, leaving his successors to fight the
battle over again, while each ' reposes on his laurels ' till a new
participant comes to share the glory and divide the spoils.
Uncle Sam pays." ^ The noise of the fray was not confined
to Connecticut, but on the 28th of Dec, Mr. Niles, from Con-
necticut, rose in the Senate in Washington and quoted from
a letter he had received from a friend on the spot : " For
God's sake send no more money among us." Mr. Niles
hoped the fund would prove beneficent to the State, al-
though for a time it might distract its councils. There were
those however who regarded the evil as greater than the
benefit.'

The bill proposed by the State Senate contained a provision
that the interest on this fund be applied to support the town
paupers or for education. Of this scheme the Herald sdJxd : " To
give the money to paupers would no doubt be a great relief to the
the New York almshouses, and set upon our State such a flood of
pauperism as would keep our inhabitant manufactories in con-
stant exercise of their benevolent designs." * Dec. 27th, in refer-
ence to the progress of the debate, it said : '* It will be seen by
the proceedings of the Legislature that the house, after being
in a state of betweenity — in which they have had to stop and
take an observation to determine their whereabouts, — have at last
got into a ' committee of the whole upon the state of the common-

' N. H. Herald, Dec. 20, 1836.
* N. H. Herald, Dec. 24, 1836.
' The Globe, Jan. 3, 1837.
^N. H. Herald, Dec. 27, 1836.

34 SURPLUS REVENUE.

wealth.' " ' The bill passed on the 29th with two dissenting
voices in the House and one in the Senate."

The Register, the administration paper, did not get so excited
about the surplus, and laughed at ihQ Herald ior its fretting. The
Herald, however, lost none of its interest in the matter, but still
had something to say from time to time. On Jan. 17th it
jubilantly exclaimed : " We presume the money will be in the
treasurer's hands in a few days, and those that want loans should
be on the qui vive with their securities when the managers will
' down with the dust.' " '

This account has been given at length to present an outline
picture of the discussions and feelings that prevailed in every
State. From what has been quoted it appears that some looked
upon the distribution as a kind of joke, while others considered it
as earnest a matter as the acquisition of two dollars is ordinarily
regarded. In general the tone of the discussion is undignified,
and the demoralizing effects of a distribution policy of this kind
are easily seen.

' N. H. Herald, Dec. 29th.

"^ During the discussion Wesley [Wesleyan] University and Washington
[Trinity] College petitioned for an annual allowance from the fund. N. H.
Herald, Dec. 26th. At the same time the president and fellows of Yale sent in
a petition asking aid in assisting indigent students. This immediately follows
the notices of the other two petitions in the report, and one is led to suppose
that the surplus may have been the prospective source of this aid. The college
books, however, contain no reference to that petition, and the Secretary of the
corporation thinks the surplus was not the source from which the college hoped
to draw.

^ A little later (Feb. 4th) the Register thought the distribution was working
favorably, and continued: "Now the people begin to see and own that our
national affairs must have been well managed, or such large sums of money
could not well have been saved for distribution." This comforting conclusion
was only partly true. Under good management the surplus would have been
far smaller, and under the best there would have been none.

CHAPTER V.

THE STEPS TAKEN TO CARRY OUT THE ACT — THE PANIC AND
THE FOURTH INSTALMENT.

We have now to consider the steps taken to carry out the de-
posit act. The amount on deposit in the different States varied
widely from the shares that would fall to those States, for the
largest deposits were in commercial centres, or in the neighbor-
hood of the land speculations. Furthermore, very many deposit
banks had deposits far exceeding their capital. This was true of
fifteen of the nineteen banks which employed R. M. Whitney as
an agent between them and the treasury ; and these nineteen
deposit banks contained $24,200,000, while the sixty-six other
banks, which did not employ Whitney, contained only $16,-
900,000.' Michigan, which was increasing in population with great
rapidity, is the strongest case in point. During 1836 $5,053, 611.52
were received for lands sold there. ^ In October, 1836, the
Farmers' and Mechanics' Bank of Michigan, with a capital of
$150,000, had $1,029,200 on deposit, and the State Bank, with a
capital of $444,779, had $1,259,974 on deposit.'

Thus Michigan had $2,267,174 on deposit within her borders,
while her share from the instalment to be received in 1837
amounted to only $382,335.31.

This was one inequality to be adjusted. But besides this there
was another of no less difficulty, for the first section of the act of
June 23d ^ had ordained that no bank should have Government
deposits exceeding three quarters of its capital stock actually paid
in any longer time than was needed for the Secretary to remove the

' 52 Niles, 91. For]the case of the Commercial Bank of Cincinnati see p. 13.

* 51 Niles, 353.

' 50 Niles, 290, and 51 Niles, 249.

36 SURPLUS REVENUE.

excess according to the provisions of section twelve. Conse-
quently the most arbitrary transfers of money had to be made
from place to place, and the money markets of business centres
were exposed alternately to hot and cold blasts, while constant
transportation of money hither and thither withdrew it from the
market to the great embarrassment of business men.

The Secretary of the Treasury had to keep these removals in
mind as well as the distribution to come in January. Further-
more, it was necessary to equalize as far as was feasible the
amounts on deposit in a given State with the amounts to be dis-
tributed to that State, so that when the act was carried out there
might be as little disturbance as possible. In accordance with
this intention, he notified each deposit bank on November i, 1836,
that a few days after January ist, or, if the deposit should not have

been accepted by the State of at that date, so soon as it should

be accepted, a transfer draft would be drawn upon it in favor of

said State for about the sum of % . Similar drafts would

come April, July, and October ist.' The money was to be paid
to the State in which the bank was situated or to some neighbor-
ing State. Now it is very clear that here were several delicate
and perplexing operations to be performed. The action, as has
been said, was wholly arbitrary ; no matter how the money market
stood, no matter how sharp the demand might be in one place,
the law said that the blind transfers of money must be made.
Consequently there was first a pressure and then a glut. But the
whole affair was vastly complicated by the fact that the deposits,
instead of being in the bank vaults, were loaned out in every direc-
tion, for the banks had expected to have the money until it was
needed for expenditures. These loans all had to be suddenly
called in,* an extremely embarrassing task. .

A writer of the time vividly described the period immediately
preceding the distribution : " The monetary affairs of the whole
country were convulsed — millions upon millions of coin were in
transitu in every direction, and consequently withdrawn from

' 51 Niles, 167.

" See Van Buren's Message to Congress in September, 1837.

SURPLUS REVENUE. 37

useful employment. Specie was going up and down the same
river, to and from the South and North and the East and West at
the same time ; millions were withdrawn from their usual and
natural channels and forced against the current of trade in literal
fulfilment of the distribution law, to points where public money
had previously never been either collected or expended except to
a very limited extent." '

Another writer said : " The passage of the distribution law was
the signal for a general contraction of the loans of the deposit
banks, and everybody knows that no contraction of bank loans to
the extent of thirty-six viillions of dollars can take place in the
United States within fifteen months without creating a great and
general pressure for money." "

In fact, the newspapers of the time, both Whig and Democratic,
referred the pressure of the spring of 1837 to the influence of the
surplus and its management. There is no doubt that it was an
effective cause, a cause sufficient in itself to produce a severe
strain, but not adequate to produce the crash that finally came.
The measures taken to prepare for distribution intensified all the
difficulties of the time. So much is sure. But it might be a fair
question whether the reckless financiering would have gone to such
disastrous lengths without the constant and violent stimulus in the
West and South which came from the deposits.

The cotton failures in the South were the beginning of the storm,
but cotton speculation was a natural result and accompaniment of
the speculative spirit which derived its life from the easy loans of
Government money.

March 30th, the Neiv York American (Whig) attributed a por-
tion of the embarrassment to the curtailment which the deposit
banks were making to be prepared to pay over the second instal-
ment April I St. ^

The Globe, a little later, said: "The proximate cause of the

' I Hazard, 328, from an article by " A gentleman fully versed in the past
and present conditions of our monetary affairs."

"^ " Examiner," in Nat. Gazette, Mar. 22, 1S37, from i Financial Register, 67.
' Quoted in the Globe, April 20, 1837.

■386399

38 SURPLUS REVENUE.

present disorders in the exchanges, and in some degree in the
money market is, as is known to every man of sense, the distribu-
tion act. This distribution act has rendered it necessary to transfer,
from point to point, an immense amount of funds, not according
to the wants of the Government, nor according to the demands of
commerce, but according to the provisions of an act of Congress
which completely binds the hands of the executive authorities.^

On May 6th, four days before the general suspension in New
York, Horace Greeley enumerated twenty-one " causes of our
calamities." Among them were : 8th, " The removal of the deposits.
Sudden contraction of United States and other bank issues
followed by a corresponding expansion. 9th, The accumulation
of public money in the Western banks, whence it was loaned and
reloaned for speculations in public lands. 13th, The act of
Congress authorizing a distribution of the public money. 15th,
Injudicious steps taken by the Secretary of the Treasury to pre-
pare for an obedience to the Distribution Law (some say rather
with a view to render it odious') by a premature transfer to the
several States." ^

Late in June the Charleston Courier in discussing the causes of
the crisis called attention to the great change in the distribution
of the national capital ; it declared that the clause removing the
deposits from banks when the deposits exceeded three fourths of
their capital, was worse in its effects than the first removal in
'ZZ-^ $6,168,854.66 had been withdrawn from the New York City
banks between Jan. ist and April ist,' $1,500,000 being in specie.
Much of this had been carried West and sunk in land speculations,
thus being taken out of the seats of commerce. "That the
deposit and distribution act has infinitely aggravated the evils of

' The Globe, May 10, 1837.

^ There appear to be no grounds whatever for this fling.

' Neiv Yorker, May 6th.

* However this may have seemed at the time, it must be remembered that it
was the first removal that made this one possible and necessary. It certainly
was not expedient to allow a bank with a $150,000 capital to get gain on
$1,000,000 public money. See p. 35.

^ See Appendix II., Table I.

SURPLUS REVENUE. 39

speculation, and has almost indefinitely postponed the period of
return to a wholesome condition of things, is demonstrated. That
a vast amount of public funds has been lost to the country, we feel
convinced ; that it never will be recovered from the States, or
what remained in deposit, from that brood of deposit banks
which that act brought into existence we feel equally convinced." '

The deposit banks had suspended with the rest, and, in fact,
the Dry Dock Bank, which yielded first in New York, was a " pet."
This was a source of keen chagrin to the administration. May
17th Secretary Woodbury sent a circular to the banks that had sus-
pended, beginning : "As the painful information has reached this
department through the public press,^ that your bank has sus-
pended specie payments, the object of this letter is to learn,
officially, if that fact has happened." The banks were therein
notified that no further deposits could be made with them, and
that what they had would be removed by warrants and transfers,
reasonable in amount and time of payment. They were asked
further when and how they expected to resume, and what meas-
ures they expected to take to secure the Government money.^

On the 26th of May a Treasury order was issued requiring that
the public money should be deposited only in banks paying specie ;
if there were no such banks, the money was to be deposited in
those pledging themselves to return the deposit punctually when
wanted, in the same kind of money that was placed in them. The
deposits not in such banks were to be drawn and placed in the
same.' As the banks had suspended, paper currency more or less
depreciated was afloat everywhere. In view of this the Secretary,
in issuing his order for the transfers of the July instalment, dis-
tinctly informed the authorities who were to receive the money,
that no State was "desired to accept from any deposit bank any

* In the Globe, July 3, 1837.

"^ It is a sufficient commentary on the deposit system that the relationsbetween
the Treasury Department and the depositaries was so loose and careless that the
Secretary first learned of such a vital fact through the newspapers !

^ 52 Niles, 183 and 213,

* 52 Niles, 258. During the summer legal proceedings were commenced
against nine deposit banks, and additional security exacted from others.

40 SURPLUS REVENUE.

currency which is not available, and at par, and which the State
would not hold itself in readiness to account for in the same man-
ner, when required under the provisions of the law. Should any
banks fail to deposit such currency, he requested that the orders
of transfer might be returned in order that the subject might be
submitted to Congress." '

No instance has been found where a State did this. The States
preferred to take a depreciated currency rather than to wait, for
they wanted the money as soon as possible, and felt, most of them,
that it would probably never be recalled.

Soon after the outbreak of the crisis, May 15th, the President
called an extra session of Congress to consider " great and weighty
matters," or in other words, what was to be done about the de-
posit system and about the probability of an empty treasury. The
resources of the Treasury had been wellnigh exhausted by the
first three instalments, for the great deposits in the Southern and
Western banks that had failed were not available.^ In his mes-
sage Van Buren thoroughly discussed the situation. There had
been a prospect of a deficiency in the Treasury, he said, which
could not well be supplied by drawing on the sums already de-
posited with States, on account of the restricted conditions of
such a call, wherefore he had felt bound to summon an extra
session, that the problem might be dealt with as soon as possible.
He announced a probable deficiency of $6,000,000 and under a cer-
tain contingency, of $10,000,000,° ere the close of the year,
and recommended the withholding of the fourth instalment until
the money could be collected from the banks ; treasury notes
might also be issued for speedy redemption. The recommendation
about the fourth instalment was sound and commended itself to
the good financiers of the time. The Financial Register had
pronounced the repeal of the act, directing the fourth instalment
to be paid, indispensable.^

' The Globe, in 52 Niles, 241.

^ See Appendix II., Table II. The first three instalments for the States came
mainly from the North and East. In the fall of 1837 there was still $9,000,-
000 on deposit in the West and Southwest.

° 53 Niles, 15. '^A^ew Haven Register, Sept. 2, 1837.

SURPLUS REVENUE. 4 1

Some of the Whig press, however, were disgusted and enraged
at the propositions.'

The whole discussion of the fourth instahnent is instructive and
rather amusing withal. Many members of the Senate and House
declared that the General Government had contracted to deliver
the money, and as the representatives of the States they claimed
the payment of the debt. True, the United States could not be
forced by a legal process, but their honor should be kept stainless.
It was only after prolonged and hot debating that on the 2d of
Oct. a bill was passed postponing the payment of the instalment
till Jan. I, 1839, when the duty of the Secretary was made i)er-
emptory to pay it, the nominal discretion of Congress over the
matter being denied. ° At the same time the power to recall the
amount already deposited was taken from the Secretary of the
Treasury and given to Congress, in other words to the States
themselves, an action equivalent to declaring the "deposit" a gift
to the States, for it was morally certain that the States would
never vote to give it back. Jan. i, 1839, there was no surplus and
the fourth instalment was not paid. To this day the three instal-
ments are carried on the treasurer's books as unavailable funds,
and are included in " the balance in the Treasury." ' Twice, at
least, since 1839 this surplus revenue has been mentioned as an
available resource. In his report of Dec. 9, 1S40, Secretary
Woodbury, in view of a deficiency of revenue in 1842 in conse-
quence of tariff reduction, advised that so much of the surplus as
was needful be recalled."

The second time was in 1861, when it was proposed to borrow
$25,000,000 to meet the demands upon the Treasury. As a
security for such a loan Secretary Dix, in a letter to the Ways and
Means Committee, Jan. 28th, recommended that " the several
States be requested to pledge the U. S. deposit funds in their

1 " Among the ' Grave and Weighty Matters' to consider which Van Buren
summoned the extra session, is placed first by the Ohio Register : ' To rob the
people of more than nine millions of dollars' " — A^. H. Herald, Oct. 6, 1837.

'See 2 Benton, 38.

^ Treas. Report, 1883, 19. ' 3 Hazard, 404.

42 SURPLUS REVENUE.

hands." ' As for the fourth instalment, again, those who hungered
for public money did not fail to look upon it with longing eyes.
Gov. Seward, in Jan. 1841, said : " It has been recommended
that the Legislature should insist upon the payment by the Federal
Government of the fourth instalment of the surplus revenue, and
require a relinquishment by Congress of all claims for a reim-
bursement of moneys constituting the United States Deposit
Fund.""

Though applications appear to have been made for the pay-
ment of the fourth instalment,^ it was not till lately that a State

' I Blaine, 397, more fully stated in Knox, 189.

It may be worth remarking that Gen. Dix came from a State where the deposit
fund had been kept inviolable. It is not likely that he would have made this
proposition if he had come from a State where the fund had long been spent.

^ 4 Hazard, 36 ; 2 Seward's works, 267. The writer cannot forbear quoting
the following curious specimens. Gov. Seward says that " if New York got her
share yearly of the public-land revenues, the internal-improvement enterprises
would no longer be rivals, for all would have all the money they wanted ; dif-
ferent educational institutions would no longer contend for shares, as there
would be ample for all. We are now obliged to practise a cold, calculating
charity. Our almshouses are perhaps sufiiciently convenient for those who are
brought into them by idleness and vice, but do they afford all the enjoyments
we would be happy to yield to the aged, the sick, the widow, and the orphan,
whose afflictions are the result of providential visitation unattended by vice or
error of their own ? . . . Let us bring annually into the treasury of the
State her proportion of these revenues (i. e. from land sales), and our fellow-
citizens can be relieved of the burthen of repairing common roads, and of pay-
ing tolls upon canals, railroads, and turnpikes, and from the heavy expenses of
the administration of justice, and the support of schools and charities. We are
sometimes called by the adversaries of internal improvement to contemplate a
condition of exhausting taxation. Who can object to a measure which would
almost secure a general exemption from the burthens of government." 4
Hazard, 54-55 ; 2 Seward's Works, 291. It would be hard to find a more
seductive picture of the benefits of a high tariff and of distribution of surpluses.
No taxes and every man's car fare paid whither he would go !

' This is stated upon the authority of Senator Garland, of Arkansas, who
asserted (April 16, 1884) that the Secretary of the Treasury had brought the
matter to the attention of Congress at nearly every session on account of the
applications made by the different States from time to time for the advance or
deposit of this fourth instalment. — 15 Cong. Record, 2996.

SURPLUS REVENUE. 43

has tried to force the contract view by an appeal to the Supreme
Court.

In 1883 the Legislature of Virginia passed an act authorizing a
claim to be made upon the Secretary of the Treasury for the
deposit of the fourth instalment.' This claim was made through
the duly authorized agent, but the Secretary of the Treasury re-
fused to grant it. The State then applied to the Supreme Court
of the United States for a mandamus to compel the Secretary of
the Treasury to deposit with the State an amount equal with the
fourth instalment ($732,809.33). By this means we have a deci-
sion of the Supreme Court on the point whether a contract ex-
isted, as was so loudly and solemnly proclaimed by the Whigs.

The Court held that no case was made for a mandamus. The
"act of June 23, 1836, created no debt or legal obligation upon
the part of the Government, but only made the States the deposi-
taries, temporarily, of a portion of the public revenue not needed,
as was then supposed, for the purposes of the United States.
. . . We are of the opinion that the Secretary of the Treasury
has no authority under existing legislation, and without further
direction from Congress, to use the surplus revenue in the Treas-
ury, from whatever source derived, or whenever, since January i,
1839, it may have accrued, for the purpose of making the fourth
instalment of deposit required by the act of 1836." ^

* Knox, 192. Arkansas, through the action of the State Treasurer and
Senator Garland, has made a similar claim. The Secretary of the Treasury re-
plied that the tradition of the department for over a dozen years had considered
the act of June 23, 1836, as obsolete, " or at least not imperatively effective
during a season of large public federal indebtedness," and that he should follow
his predecessors. — Knox, ibid.

" III U. S. Reports, 46-8. The decision vv^as rendered March 17, 1884.
April i6th Senator Garland, of Arkansas, remarked that this decision threw
the matter back upon the action of Congress, and he offered a resolution that
the Committee of Finance should investigate the matter and declare whether, in
their judgment, the Secretary of the Treasury should be authorized and directed
to make this payment ; and if not, what legislation, if any, was necessary to
adjust the matter. — 15 Cong. Record, 2996.

CHAPTER VI.
the surplus in the states.

Alabama Received $669,088.95.

The surplus was accepted December 16, 1836, and the faith of
the State pledged " for the safe-keeping and repayment thereof,"
according to the requirements of the national act.'

By the act of June 30, 1837, the money was to be deposited in
the State Bank and its branches, and all other laws were repealed,
provided the deposit was made before May i, 1838. The State
Bank at Tuscaloosa and the four branches, situated respectively
in Montgomery, Mobile, Decatur, and Huntsville, were each to
have a fifth. ^ The conditions were complied with, for we soon
find in the report of a commission to examine the State Bank that
$133,817.79 was credited to the United States surplus revenue.'

In February, 1840, the interest on the surplus was devoted to
form a part of an annual payment of $200,000 required of the
bank and its branches to aid in establishing a school system.
This law was repealed January 21, 1843.' The bank at this time
was greatly embarrassed by heavy fixed charges, and the repeal
was doubtless a measure of relief. In 1841 these fixed charges
exceeded its profits about $500,000 yearly, and were paid from
the capital." In fact, for a few years previous to 1843 all the
State expenses had been paid by the banks.® Among the items of
the bank capital that was disappearing we find " university and

' Acts of 1836, 3 ; Clay's Digest, 552.

" Clay, ibid.

° I Financial Reg., 203.

* Eaton, 12.

' See note i on p. 45.

" 63 Niles, 279.

SURPLUS REVENUE. 45

Other funds used as a part of the capital of the State Bank,
$1,058,195." ' The surplus is probably included here.

Besides heavy fixed charges constantly diminishing its capital,
bad management increased the difficulties which beset the bank.
As early as the close of the year 1839, the bank commissioners of
the State announced that the aggregate loss of the bank and its
branches reached the sum of $4,850,000, "squandered, according
to all accounts, in every direction, and never more to be returned
to the public coffers." ^

Hardly a year later, early in 1841, the bad debts due the bank
of the State and its branches were officially announced as amount-
ing to $5,640,761.59,' while in 1844, or at the beginning of 1845,
a legislative committee classified the debts due from the counties
of the State to the bank and its branches as follows :

"Good" $6,755,103 27

"Doubtful" 1,019,395 18

"Bad" 6,179,680 27

Unknown 632,792 48

$14,586,781 20

The committee thought that by a more efficient mode of collec-
tion a considerable part of the " bad " and " doubtful " accounts
might be recovered.^

We have assumed that the surplus was included in the capital
of the bank at this time because we found no mention of its pre-
vious withdrawal, but in 1846 we come across a note that implies
either a withdrawal at some earlier period, or that the State au-
thorities preferred to consider that the surplus had not suffered
by the above-mentioned losses, but was still available for any pur-
pose. In this meagre note the surplus revenue is mentioned
among the items of the State's indebtedness along with the " reve-
nue fund and the three-per-cent. fund." ' It seems more prob-

' A Petition for Reform, 5 Hazard, 294.

* 57 Niles, 352.
' 63 Niles, 71.

* 67 Niles, 368.

* Am. Aim., 1847, 268.

46 ' SURPLUS REVENUE.

able that this means that the State had borrowed the fund, taking
it from the bank, than that it refers to the obligation of the State
to repay it to the General Government. A year later we read : "It
is considered doubtful whether the university and school funds,
and the surplus revenue, will ever be repaid from the treasury of
the State." '

The fair conclusion seems to be, then, that the surplus was used
for State purposes, if not squandered in banking.''

The authorities, however, still kept the deposit in view and, in
1854, set apart and appropriated, among the sums to be known as
the educational fund, " the annual interest at eight per cent, on
that portion of the surplus revenue of the United States deposited
with this State under the act of Congress of the 23d of June,
1836." The fund was available only for the payment of teachers
duly qualified.'

This stipulation was repeated in 1856,' and again in 1860.^ The
interest fell sadly in arrears during the distresses of the war and
of the reconstruction period, so that an act was passed October
10, 1868, appropriating $245,411.46 for the year beginning Octo-
ber I, 1868, " the same being the interest now due from the State
on the school fund." °

In the Revised Code of 1867 the surplus revenue forms the first
item of the school fund, as in the law of 1854.'

But this yearly charge of $53,596.94 proved too heavy a burden
upon the treasury of the State, which was heavily in debt, and had
not recovered from the losses of the war. Consequently, in March,
1875, section 957 of the Code was repealed, the school fund re-

1 Am. Aim., 1848, 286.

' Mr. Eaton says the surplus was used up in the war by the State. It may
be so accounted on the State books, but it seems very doubtful indeed whether
the old loan was ever repaid from the State treasury. It would be almost an
unique instance.

'Acts, 1853-4, 8.

" Acts, 1856, 34.

' Eaton.

* Acts, 1868, 255.

' Walker, R. C, 262, Sect. 957.

SURPLUS REVENUE. 47

organized, and the first paragraph about the surplus stricken out,
no mention whatever being made of it.' At the same time, how-
ever, the Constitution of 1875 appropriated for education "the
income arising from the surpkis-revenue fund until it is called for
by the United States Government." ^ This shows that the intent
of the repealing act was not to abolish the fund, but to lessen the
burden which an interest charge of eight per cent, brought upon
the treasury. The discrepancy between these laws was removed
by the educational laws of February 18, 1876, and February 8,
1 87 7, which re-enacted the surplus revenue clause of the old law,
and changed the rate of interest from eight to four per cent.^
Apparently the school income from this source ceased for only
one year. The annual appropriation is now $26,763.47. This
money is all raised by taxation, and is in no way the incovie of the
surplus revenue.^ The only relation which can fairly be said to
exist between this appropriation and the surplus is that of occasion
to event ; the surplus deposit was the occasion of part of the school
appropriation of 1854. Or, to state it a little differently, when
they made an annual appropriation for education, a portion thereof
was called " interest on the deposit fund."

Arkansas Received $286,751.49.
By the act of November 2, 1836, the surplus was deposited in
the principal bank, and was to be " considered as a part of the
capital thereof." '

1 Laws, 1874-5, 170.

^ Art. 13, sec. 5. See Code of 1876, 147.

'Acts of 1876-7, 199 ; Code of 1876, 384-5-

* " It is erroneously supposed by many that the interest annually accruing on
the i6th section, the vahieless i6th section, and the United States surplus-
revenue funds, was the result of a prudent investment of the capital of those
funds in solvent securities ; but in reality they have no existence except upon
the books of the State offices in which said accounts are kept. The State
became the trustee, and her debt long since absorbed them, and every dollar of
the education fund, except the annual receipts from the sale of school lands is
now directly derived from the revenues of the State." — Report of H. Clay Arm-
strong, State Supt. of Ed., 1882, p. 7.

free Library »""^^3,^>«*,i*.

48 SURPLUS REVENUE.

June 12, 1837, the Bank of the State of Arkansas began business
with a capital of $413,105.29, of which $286,156.49 was derived
from the surplus.' The bank suspended specie payments imme-
diately, and consequently did a limited business for a while. The
next reference to the surplus appears in 1843. On February ist,
the Legislature passed a bill over the governor's veto, ordering
the State Bank " to reimburse the State " $15,000 in specie from
the surplus revenue to meet an appropriation.*

On the 3d of February this first step was followed by a general
act, the second section of which runs as follows : " Whenever the
ordinary revenue in the treasury shall not be sufficient to meet and
discharge warrants drawn under appropriations made, or which
shall be made by law, a sufficient sum of the surplus-revenue fund
shall be used for the payment of such warrants." '

This act, we are told by Gov. Roane, in 1852, was the result of
general bad management. When the banks suspended, they were
allowed ten years, during which they were to liquidate their debts.
By this course their indebtedness became " confirmed as an ac-
count of the State." ' Such a condition of affairs discouraged
emigration, and " the legislators lost confidence in the State Gov-
ernment and began to try to secure their districts as much treasure
as possible." So, to save their constituents from taxation, they
used up the surplus for the State expenses, and, to be sure that
they and their friends got something before general dissolution
came, they divided the seminary fund and the proceeds of the
500,000 acres given for internal improvements among the coun-

' Trotter, 337 and 450.

= Acts of Arkansas, 1842-3, 105. 'English, 962 ; Gould, 1047.

* " The State debt had its origin in the suspension of the business of the two
banks chartered by the Legislature shortly after the organization of the State
Government. In order to procure a capital fund upon which to base their op-
erations, bonds to the amount of $2,827,000 were sold, for the redemption of
which the faith of the State was pledged. After their suspension, these banks
were placed in liquidation by an act of the Legislature, which extended the time
of payment to those indebted for ten years ; by which injudicious policy the
amount of their indebtedness was confined as an account of the State."— Gov.
Roane's Mess., Nov., 1S52 ; Am. Statist. Ann., 185^, pp. 165-6.

SURPLUS REVENUE. 49

ties. This bad policy dispirited the people and hindered the
growth of the State.'

But before the surplus was used up, attempts were made to save
some of it for educational purposes. On the same day that it was
made subject to appropriation, an act, establishing a system of
common schools, was passed, in which it was provided (Sec. 41) :
" that so much of the surplus revenue of the United States, dis-
tributed to the State of Arkansas, as shall remain unappropriated
after the final adjournment of the present General Assembly, shall
form a capital for the use, benefit, and support of common schools
in this State." The interest was made payable to the counties in
the ratio of white population.^

If the friends of education hoped for much help from the sur-
plus, their hopes were in vain, for the fund was almost entirely
used up at or near the end of the session.'

If they hoped much from the law, their hopes were equally vain,
for it was a dead letter. It did not even protect the little rem-
nant of the surplus. In October, 1846, there was $13,830.95 of
this money to the credit of the State in the bank, and very soon
after $4,667.19 was drawn." The $9,163.76, left to the credit of
the State, and nominally an educational fund, appears on the books
as late as October, 1850,^ It is altogether probable, however,
that this small remnant soon followed the rest of the surplus." The
law, in fact, was too complicated. As late as 1848, the system
had not been organized, and nobody believed that it would be."

The people were perfectly indifferent on the subject ; ' and, how-
ever bountiful their resources might have been, or how liberal

' Gov. Roane: Am. Statist. Ann., 1854, 162.

^ Acts of 1842-3, 138. Am. Aim., 1845, 266.

' Gov. Drew : i Bankers' Mag., p. 429.

^ Auditor's Report, Table B ; Acts, 1848-9, 2l6.

^ Report, Table D ; Acts, 1850-1, 320.

■^ It will surprise no student of banking in this period to learn that, though the
surplus was almost entirely drawn from the bank, it was still represented as a
basis for a corresponding amount of notes of the State Bank in circulation. —
I Bankers' Mag., 432.

' Am. Aim., 1856, 309.

50 SURPLUS REVENUE.

soever their laws, their own indifference would have rendered their
resources useless and their laws without effect.

We could have no better example of the truth, that it is public
sentiment which gives life to laws, or no better justification of
that only sound principle which makes local taxation the proper
source from which to draw the supplies for local wants.

If Arkansas had had a school fund of a million dollars, it would

soon have gone the way of the surplus fund, taking the place of

taxation for governmental wants ; or the way of the seminary fund,

to satisfy the greed of local politicians. The surplus revenue did

Arkansas no good, but rather much harm, for its presence led to

corruption, and, finally, relieved the people of taxation at a time

when they most needed it, and when relief therefrom only sowed

the seeds of future backwardness in meeting their obligations.

Arkansas failed to pay the interest on that bank debt for thirty

years, and, consequently, was numbered among the repudiating

States.'

Connecticut Received $764,670.60.

An extra session of the Legislature was called to meet Dec. 21,
1836, mainly to consider the question of the deposit money.'*
The governor recommended that the school-fund commissioners
loan it on mortgage and add the interest to the school fund.'
There was a stormy and confused discussion for nine days, and
many propositions were advanced. A bill was finally passed Dec.
29, 1836, with two dissenting voices in the House and one in the
Senate.* The act provided that the money be deposited with the
towns which might receive it on condition that they should keep
and preserve the money as a deposit. The principal was to be
loaned on good security at the legal rate of interest, and the entire
income appropiated annually ; " at least one half thereof for the
promotion of education in common schools in such manner and
proportions as the towns may direct ; and the remainder for the

' Hunt's Merchants' Mag. Year-Book, 203.
" For further particulars see page 32.
^ New Haven Herald, Dec. 21, 1836.
^Nexo Haven Herald, Dec, 27, 1836.

SURPLUS REVENUE. 5 I

ordinary expenses of such town and for no other purpose."
"The principal of this fund shall remain permanent, and no part
of it shall ever be used for any purposes other than those desig-
nated in the act." '

If the towns failed to make good the losses to the principal
within one year after the same should occur, such towns should
forfeit a sum*equal to the whole amount received from the treasury.
When towns refused their shares the treasury should loan them at
the expense of the said towns ; ° and when the towns were divided
the surplus also should be divided proportionately.^ For nearly
twenty years, about three quarters of the income from the fund, or
about $33,000, was devoted to schools.'' Then came the act of
June 30, 1855, by which the whole income was applied to schools ;
one half to be divided pro rata among the districts, and one half
distributed under the direction of the selectmen and town
treasurer.^

Of late years the income has been diminishing very rapidly either
from losses, lower interest, or from unproductiveness of the funds."

' This and the following provisions are dead letters now.

" The towns of Berlin, Grandby, Wethersfield, Brandford, North Brandford,
Southbury, and Bolton did not draw their shares, but invested them in State
bonds and still draw their interest.

'Laws, 1837, 61 ff. Gen'l St., 593-8. Eaton, 14.

*"A second and considerable source to meet the school expense is half the
income of the ' Town Deposit Fund,' amounting to $764,670.61 and such por-
tion of the remainder as the towns may appropriate to education in common
schools. As far as heard from, about one half of the remainder is devoted to
this object — making an aggregate income of over $33,000. This amount is, in
most of the towns, distributed to the school societies, and through them to the
districts, on the same principle as the avails of the School Fund. In quite a
large number it is divided equally to the districts without reference to the enum-
eration. This is done to give additional aid to weak districts. The annual
appropriation of this fund is one of the ' vexed questions ' of town meetings."

First Annual Report of the Secretary of the School Board, Henry Barnard.
Connecticut Common School Journal (1838), 161.

' Laws of 1855, 105.

° The income was $48,078.92 in 1866, wavered between that and $43>985-75
in 1869, averaging about $45,000. Since 1877 when the income was $47,665
it has steadily sunk to $42,156.28 in 1884.— Report of Sec'y of Ed., 1884, 21.

52 SURPLUS REVENUE.

The following is from the last school report : " The fund origi-
nally amounted to ^763,661.83 and has somewhat diminished.
The principal has in many cases been borrowed and used by the
towns, and exists only in the form of town orders, upon which the
towns pay interest. The result is that it does not in fact add to
the school resources. The town must raise this interest, which is
accounted a town charge, and instead of actually increasing school
resources there is simply a transfer of charges on the books. It
cannot be said that this is within the intent of the law, which re-
quires the interest to be actually devoted to the maintenance of
schools." ' Some towns have lost more or less of the money and
not refunded it.

Delaware Received $286,751.49.

The share of the surplus that fell to Delaware was exactly one
tenth of the share of Pennsylvania, and about one hundredth of
the whole sum deposited. As Delaware invested the surplus, we
will first see what the investments were, and then what was done
with the income therefrom. The money was accepted January
16, 1837, to be deposited in the Farmers' Bank, of the State of
Delaware, at Dover. At the same place the subsequently accru-
ing dividends^ were to be deposited. By an act to authorize the
building of a court-house, etc., at Georgetown, Sussex County,
" the State Treasurer was to pay the building commissioners
$5,000 from the surplus fund of this State, to be used in the
erection of this building." Sussex County was to pay six per cent,
interest on this loan, which was to be deducted from her share of
the annual interest from the surplus revenue.'

Four days later a general act was passed, providing for the in-

' Ibid.

A table of the towns and their shares as they existed in 1847 is in the Report
of 1876, pp. 254-5. Statistics of the state of the fund in 1881 in MS. are in
the Yale College library, and the office of the State Secretary of Education at
Hartford. A thorough investigation of the matter at an early day is promised
by the Secretary of Education.

=■ Acts, 1837, 64-7.

' Act of February 17th. Acts of 1837, 140.

SURPLUS REVENUE. 53

vestment of the rest. $250,000 was to be expended in baying 5,000
shares of the increased stock of the Farmers' Bank of the State of
Delaware, at par, — to wit, at $50 per share. If the whole amount
expected ($382,335.31) should not be received, a sum bearing the
same ratio to what was finally received, " after deducting the sums
already paid thereout," that !|25o,ooo bore to the amount ex-
pected, was to be in Farmers' Bank stock. Further, $110,000, or
a sum proportionate to the remainder of the surplus was to be
lent for a period not longer than two years to the Wilmington and
Susquehanna Railroad Company, on approved security, provided
the company accepted their new charter. Any remaining portion
of the surplus was to be loaned under the approval of the Com-
mittee of Three, who had charge of the railroad investment.*

The amount invested under this law, as will appear, was
$180,000 for Farmers' Bank stock, and $80,793.83 loaned to the
railroad. Nominally, however, $1 10,000 was loaned to the Wil-
mington and Susquehanna Railroad Company, and their penal
bond for $220,000 was recorded January 28, 1839.^ Soon after-
wards this loan was extended to the Philadelphia, Wilmington, and
Baltimore Railroad for a period of not more ^than four years, at
the same rate of interest. This was a consolidated road, which
had absorbed the Wilmington and Susquehanna.' The mortgage
for this loan of $80,793.83 was accepted February 22, 1843.'
This loan was to be extended under certain conditions till 1860."

The remainder of the surplus, $20,958.49, was probably loaned
under the act, or invested in some way. It is now invested in
Smyrna Bank stock and National Bank of Delaware stock.'

To return now to the disposition of the income, February 22,
1837, " An act to provide for the distribution of the interest of
the surplus revenue" was passed. The interest was to be equally
divided into three parts, one part to be for " the use and benefit"

' Act of February 21st. Acts, 1837, 175-6.

"^ Acts of 1S39, 205.

^ Acts, 1839, 242.

* Acts, 1S43, 521 ; see also Revised Statutes, 1852, 205.

' Acts of 1847, 139-40, and Revised Statutes (1874), 201.

' Statement of Supt. of Schools.

54 SURPLUS REVENUE.

of each of the three counties, New Castle, Kent, and Sussex.
The shares falling to Kent and New Castle counties were to be
used for schools, but the share of Sussex County was to be re-
divided, one third being set apart for schools, and two thirds to
pay the poor tax of the county ; and the treasurer was to see that
each county received as nearly equal benefit as possible, keeping
in mind the loan to Sussex County/ By an amendment, Febru-
ary 12, 1845, the whole of the share of Sussex was to be appro-
priated to schools.*

The certificates of the Phil, Wilmington, and Baltimore Railroad,
which were bought with the surplus and which the school fund
owned, amounted at their par value to $85, 000. The fund paid
$80,793.83 for them, and finally sold them in 1881 for $131,750.
Thereupon a single bond of $156,750 was issued for this sum and
for $25,000 proceeds of some stock in the New Castle and Wil-
mington Railroad, previously extinguished and paid in, but be-
longing to the school fund.^

The income from the investments made of the surplus revenue
is apportioned among the school districts, and comprises the divi-
dends on 5,000 shares of Farmers' Bank stock, for which $36 per
share was paid ; the dividends on the $20,958.49 invested in stock
of the Smyrna Bank and of the National Bank of Delaware ;
" the interest on $131,750 of the above-mentioned bond for $156,
750 of the State of Delaware to the school funds of said State, at six
per cent, interest, issued under chap. 324, v. 16, and the interest
on the sum of $5,000 advanced to the county of Sussex."*

To summarize now. Of the surplus,
$180,000 00 was invested in Farmers' Bank stock,

80,793 °° was loaned to the Phil., Wil., and Bait. R. R.,
5,000 00 " " " Sussex County,
20,958 49 was invested or loaned.

$286,751 49

' Acts, 1837, 187-8, Eaton, 16.

* Acts, 1845, 41, Eaton, 16.

'Act of March 29th ; Laws, iSSi, 318-9.

* Digest of School Laws, 1881, Art. 13, p. 30.

SURPLUS REVENUE. 55

Now, supposing the bank stock to be worth only $180,000,
though it is really worth more than %T,(i per share,' and assuming
that the Smyrna Bank stock and National Bank of Delaware stock
to be at par, we find that the Delaware school fund owns securi-
ties worth $337,708.49, or more, obtained by an investment
of $286,751.49 surplus revenue. Thus Delaware stands far
ahead of all the States that received the surplus, for she has
now far more to show for it than she received, besides a yearly in-
come of $15,000^ for the support of schools. At present the
income of the permanent school fund, including the $286,751.49
surplus revenue, with the revenue from licenses, amounts to over
$25,000 a year, and obviates the necessity of a State tax for
schools. °

' The Supt. of Schools is the authority for this.

'Eaton, 17.

' 5th Ann. Report of Schools, 18S0, 53.

CHAPTER VII.

the surplus in the states.
Georgia Received $1,051,422.09.

When the Legislature met in Nov., 1836, Gov. Schley said in
his message : " Declarations at the time of its enactment (/. e., the
Deposit Act), and since by some of its ablest advocates, that these
deposits were intended as donations never to be reclaimed ; and the
simultaneous avowal by the great beneficiaries of the tariff, that
this policy was to become a system to conciliate the complaining
States, are calculated to excite a jealous watchfulness of the innova-
tion. . . . The framers of the Constitution never could have con-
templated the accumulation of redundant revenues to foster par-
ticular interests in its collection, and to subsidize others in its
distribution." Further, Georgia had ample resources of her own,
and her people were too proud to be the beneficiaries of the
National Government. Georgia should solemnly protest and call
for a reduction of the tariff. It was best to loan the deposit on
good security, that it might easily be returned, and to apply the
interest to the State expenses.'

The Legislature followed this advice, and in their acceptance,
Dec. 26th, uttered a vehement protest against distribution, affirm-
ing that they would have refused the deposit had it not been for
the provision that the share of any refusing State should be divided
among the other States.

Two days later an act was passed directing that the money be
deposited in the Central Bank of Ga., and loaned to the public
like other funds, under the regulation for discounting notes ; it
was also to be loaned to sound banks in which the State was a
stockholder, to be repaid at sixty days' notice, under a penalty of

' 51 Niles, 207.

SURPLUS REVENUE. 57

twenty-five per cent, damages, besides interest. The interest on
the loans was to be disposed of according to subsequent acts.'

Dec. 26, 1837, " An act to establish a system of education by
common schools " was passed, by which the academic and poor
school funds were consolidated, and together with the interest on
one third part of the surplus revenue were formed into a common
school fund.^ This act was repealed two years later, and the
funds were constituted into a poor school fund/ The appropria-
tion of the common school fund for 1840, under the laws of 1837
and 1838, amounted to $100,646.89.*

But these school laws were not supported by public sentiment,
and so easily became dead-letters. In 1870 it was stated on the
best authority that the school fund ^ was being paid into the treasury,
and as it was not kept separate from other funds, it was used to
pay members of the General Assembly, or other expenses. The
same writer continues : " And indeed all the school fund had been
paid out in this way before the date to establish [sic) a common
school system. ... It has been paid out as fast as received
into the treasury ever since. It is now being paid to the members
of the General Assembly, and to meet other expenses of the State.""

' Prince, 837 ; Hotchkiss, 140-2 ; see also 51 Niles, 305, and Eaton, 17.

='Acts, 1837, 94.

^ Acts, 1840, 61. Mr. Eaton traces at some length the changes which this
fund underwent. As his address is in every considerable library, or can be got
by writing for it, it is unnecessary to reprint the matter, especially as educa-
tional interests got little benefit from the fund.

* Acts, 1840, 53 ; Appendix. "Fund" here doubtless means "income" of
the fund.

' I suppose this means the income from school funds.

^ Supt. Lewis, p. 3 of an open letter to the teachers of the State, appended to
the Report of 1871. I am not certain what he means by " the date to establish
a common school system," but I suppose the reference is to the law of 1837.
(See above.)

There must have been exceptions to the general practice here described, if I
have rightly understood Mr. Lewis' meaning, for in 1839 it was stated that the
annual appropriations from various funds for purposes of general education
amounted to about $60,000 — a sum which was deemed wholly inadequate to the
wants of the State. The governor was of the opinion that the present system of
education should be thoroughly amended or abandoned altogether, — 57 Niles, 202.

58 SURPLUS REVENUE.

This abuse was corrected in 1870/

The other two thirds of the surplus remained in the Central Bank,
and no special appropriation of the interest has been met with.'^
In the general statement of the condition of the Central Bank
of Ga., Nov. 7, 1842, among the liabilities appears this item :
"United States Surplus Revenue, $1,051,422.09."^ The act
of Dec. 23, 1840, contained the following provision : The directors
of the Central Bank " are hereby authorized and required to apply,
from time to time as need may be, so much of the money of {sic)
the said bank, not otherwise appropriated, as may be sufficient to
pay the interest on the public debt." Furthermore, an additional
sum was annually to be applied to the payment of the principal of
said debt.* This provision afforded ample means to consume the
interest on the surplus without other legislation. In 1841 the Cen-
tral Bank was in great straits on account of the severe encroach-

' Laws of 1870, 61 ; Act of July 28th.

"^ It is stated in a letter to Blair's Globe, Jan. 14, 1837, that these two thirds
were appropriated to building a railroad in opposition to the Louisville, Cincin-
nati, and Charleston R. R. The road meant is doubtless the Western and At-
lantic, which was built by the State, and from the income of which the State
afterward appropriated large sums for education. But this assertion appears
untrustworthy compared with the bank report. The State records in the treas-
urer's ofifice at Atlanta throw no light upon the subject. In regard to the
Western and Atlantic R. R. it may not be going too far from my subject
to state a few facts, for this road is, I think, almost the only prominent instance
of State ownership of railroads in this country. The road was built by the State.
Up to Oct. I, 1839, it had cost $1,320,144, all of which save $250,000 had been
raised by the sale of State stocks (57 Niles, 202). By 1849 the debt incurred to
build the road amounted to $1,395,250, and the total cost of 116 miles was
estimated to be $2,300,000. It was hoped that the revenue derived from the
road would be a great help in paying the State debt (4 Bankers' Mag., 231-2).
In 1858 the State appropriated $100,000 a year from the income of the property
for the benefit of schools (Eaton, 18). The road suffered during the war, but was
refitted, and by the act of Oct. 24, 187, was leased with its rolling stock
for twenty years " to a corporation mainly composed of the officials of connec-
ting roads." The lessees are under bonds of $8,000,000 to operate and maintain
the road and pay " monthly " a rental of $25,000 (Pool's Manual, 1884, 460).
The estimated value of the road is $8,000,000.

^Bank Reports of Ga., 1842, 94. ^ Acts of 1840, 150.

SURPLUS REVENUE. 59

ments upon its capital from the acts of the Legislature/ but it
continued to exist a dozen years more, and then went into liqui-
dation. Gov. Howell Cobb said in 1853 : " On careful examina-
tion of the affairs of the Central Bank, it appears that after
exhausting its resources, there will be left the amount of $369,500,
which must be paid from the treasury."^

It seems, then, that the surplus in Georgia was used up in one
way and another, some of it doubtless having been lost on bad
loans. Not nearly so much help was derived from it for educa-
tion as would appear from a superficial examination. It went as
the other State funds went, economically or extravagantly accord-
ing to the quality of the prevailing administration.

Illinois Received $477,919.14.

The deposit was accepted December 17, 1836, and the most of
it was deposited in the bank of the State.' On February 27,
1837, was passed an act which involved Illinois in disaster and
debt. It was entitled " An act to establish and maintain a gen-
eral system of internal improvements." Among the resources from
which the fund for this purpose was to be drawn are enumerated :
" Moneys to be received from the treasury of the United States,"
by the act providing for a distribution of surplus revenue. When
the United States should demand it, payment was to be made out
of the fund for internal improvements.*

' Gov. MacDonald, 5 Hazard, 307.

^ Message, Amer. Statist. Ann., 1854, 202.

* Acts 1836-7, 193. Some additional act is referred to here : " The Legis-
lature of Illinois has instructed the agent of that State to demand and receive
the surphis in specie, from the institution on which the treasury draft may be
given." — Boston Recorder, February 3, 1837. I have read somewhere that the
specie was transported in ox-carts under great difficulties. The cost of collect-
ing first instalment was $807. (Treas. Report, Laws of Special Sess., 125.) In
consequence of this law Gov. Duncan called a special session of the Legislature
June 5, 1837, to consider among other things what to do about the later instal-
ments of the surplus, as the deposit banks had suspended specie payments. (52
Niles, 291 and 359.)

^ Acts, 1837, 137.

6o SURPLUS REVENUE.

March 4th, " An act amending several acts" in relation to com-
mon schools, was passed to be put in force immediately. It con-
tained the provision : " All monies which may be received into
the State under the provisions of any act of Congress directing or
authorizing any part of the revenue of the United States to be de-
posited in the State treasury, except that which has been appro-
priated to purposes of internal improvement, shall be added to
and form a part of the common school fund of the State,
and shall be loaned to the State on the same terms upon
which the seminary and school funds have heretofore been
loaned." '

Fortunately an interpretation for this rather ambiguous law was
found, and a very arbitrary interpretation it was ; perhaps, how-
ever, no other could have been given. Auditor Davis in his next
report said : " In conformity with what I conceive to be the
proper construction of the acts entitled [then follow the above
titles], I have added to the school fund $33^.592-32 of the
surplus revenue, being the amount which the State owed to the
school, college, and seminary funds at the time when the said laws
were passed." ^

Practically the school fund got the second and third instalments
and a few thousand dollars from the first. In view of the dis-
crepancy between the internal improvement and common school
laws and their uncertain wording it is probably due to Mr. Davis
that the school fund got any thing. From his remarks, however,
we are not to understand that the money settled the debt of the
State to the school fund and restored that to its integrity, for such
was not the case, for the State immediately borrowed the surplus

' Acts, 1837, 315.

"" Auditor's Report. Laws at the Special Session, 1837, 120. " This amount
was added and bears interest from the following dates :

Amount loaned 25th March, 1837 . . . $239,306.38

2d May, " ... 79,306.38

29th Jan., " ... 16,979.56

$335,592.32"

SURPLUS REVENUE. 6 1

and used it up.' It paid six per cent, interest on it,^ to be sure, but
that interest for a time apparently followed the principal, to be
absorbed in the vast debt of the State, from the contraction of
which no advantage was derived. In this particular respect the
surplus was a great injury to the State, for it relieved the people
of taxation when they were involving themselves deeply in debt,
just the time when the weight of the coming burden should have
acted as a brake.' In Illinois the surplus was expended in ex-
travagant and unsuccessful improvements — undertakings which
in reckless management perhaps surpass those of any other State,
while they gave rise to unparalleled log-rolling.''

The fortunate interpretation of an ambiguous law secured an
interest charge for the State school fund. It is with doubtful
propriety, however, that the surplus can be said to have helped
education in Illinois, though it gave rise to this interest charge on
the State treasury.

Indiana Received $860,254.44.

The deposit was accepted Dec. 21, 1836.' On Feb. 6, 1837,

1 In estimating-lhe State debt, the $807,585.39 due to the school fund, and
$477,919.44 " surphis revenue which has been remitted by, the General Govern-
ment," were subtracted. — Illinois Paper, in 61 Niles, 242. This is the only in-
stance I remember where it is stated as z. fact that the U. S. had remitted the
surplus, supposing " remitted" to mean " renounced their claims to."

" Seventh Report on Ed,, 132. The loan in this book is dated wrongly
1835 ; it should be 1837, of course. — See, also. Am. Aim., 1854, 306.

Mn Feb., 1841, the chairman of a Committee on Finance reported that
previous legislation on taxation had been_ conducted on deceptive principles,
and that, consequently, alarm in reference to taxation was prevailing. " The
people are led to believe that they need not now be taxed more than they have
heretofore been ; while in truth a large portion of the State expenses have been
defrayed by applying the school fund to this purpose — a system which cannot
any longer be pursued." — 4 Hazard, 162.

" In the foregoing estimates I have not put down any thing to be received
from the school fund. There will, of course, be several thousand dollars
received from this source within the next two years, to be used as revenue, un-
less the laws are changed." — Report of Aud. Davis, ibid.

* The fuller consideration of internal improvements in Illinois is reserved to
another place.— See chap. xii. ^ Laws of 1836-7, 97.

62 SURPLUS REVENUE.

was passed an act providing for the distribution of the surplus
revenue. It directed that one half should be loaned among the
counties in proportion to the number of taxable polls, to be reap-
portioned every five years, and to be loaned only to citizens
residing in the several counties in sums not exceeding $400 ' to
one man at eight * per cent, annual interest. The interest was to
be paid over to the school commissioner. Of the other half,
$280,000, or such sum as should remain after the appropriation to
the State capitol, was to be invested in bank stock. ^

As the payment of the fourth instalment was postponed till
1839, the State issued bonds to the amount of $294,000, and ad-
vanced them to the bank in anticipation of the fourth instalment.*
About $577,000 appears to have been distributed to the counties,
which was a little more than half ; consequently enough more was
given to the bank to make the division even."

Jan. 27, 1836, an internal improvement law had been passed,
authorizing a loan of $10,000,000 to construct improvements at
the expense of the State, which should belong wholly to the

' $300 is the limit in tlie Revised Statutes of 1843, p. 252.

* Mr. Eaton (p. ig) says the interest was 7 per cent., but the law of 1S37
reads 8 per cent. The interest is stated as at 7 per cent, in Am. Aim., 1854,
304, where it is also said that 2^ per cent, went to pay county auditors and
treasurers.

^ Acts 1836-7, 3. This act was somewhat revised Feb. 17, 1838, and Feb.
18, 1839 (Acts 1838-9, 30).

I have been unable to find out about the appropriation to the State capitol,
if there was any. From the following it would be inferred that there was
none : " The surplus has been divided, one half placed in the bank, the interest
to be applied to internal improvements ; the other half to be loaned out by
county commissioners, and the interest applied to support common schools." —
51 Niles, 416. The Legislature adjourned the day the act was passed.

* Dillon 573 ; 3 Hazard, 145. These bonds were redeemed by 1847. (Am.
Statist. Ann., 1854, 222.)

' The sum distributed to the counties is stated differently in different years,
e.g., in Nov., 1847, $580,433.89 (Am. Aim., 1849, 301) ; Jan., 1849, $694,216
(Am. Aim., 1852, 307). This is called simply " S. R. Fund," and may include
some of the bank stock ; but in 1852, under the same title, the amount is only
$552,529.92 (Am. St. Ann., 1854, 226). Eaton, however, p. 19, states that ex-
actly half was distributed, viz. : $573,502.96.

SURPLUS REVENUE. 63

State. Of the interest charges accruing on so much of this debt
as was contracted, $40,000 a year was paid by the bank from the
surplus in its hands.' More of the surplus was said to be available
for that purpose in 1839.'

In Feb., 1841, a law was passed providing for calling in the sur-
plus loaned among the counties, and investing it in bank stock.
If anybody who had borrowed of the surplus desired longer time,
it could be granted him at six per cent, interest, "upon delivering
his note to the proper branch, with sufficient endorsers for the

sum he might owe." The bank could then " grant its usual indul-

>» 3
gences.

Henceforward the data about Indiana are uncertain and unsat-
isfactory, and no help could be obtained from the State au-
thorities.

In 1852, in the Auditor's Report, under the head of " Surplus
Revenue Fund," we find :

On account of loans refunded . . . Sq^o-SS

" " interest on loans . , . 429.36

" " cost of advertising refunded . 13-00"

Now these figures admit of no certain interpretation from the
facts at hand. They may be said to mean that nearly all the
money had been refunded before 1852, which accounts for the
small payment and interest charge. On the other hand, these fig-
ures are equally well accounted for if Mr. McCulloch's statement
(quoted below), that nearly all was lost, is accepted. Finally, Mr.
Eaton says the money is now nearly all in the counties. This ex-
plains the small payment, but not the small interest charge.
The reconciliation or rejection of these statements must be left to
those who have more information than is at my command.

* Acts, 1835-6, 6 ; Trotter, 304.

"57 Niles, 37.

^ Acts, 1841, 192. The same use was made of the sinking fund, the saline
fund, the college fund, and the school fund. 60 Niles, 40. Yet, so far as the
law referred to the surplus, it was apparently contradicted in the Revised Stat-
utes of 1843, 251, where it is provided that all money received by the counties
from that fund should be loaned.

*Acts, 1853, 155.

64 SURPLUS REVENUE.

By the Constitution of 1851/ the school laws of 1855 ' and 1865,
the surplus was made a part of the school fund.'

So far as the interest of Indiana's share went for internal im-
provements, it was probably wasted.' In 1844 the debt of the State
was $12,218,000. The bank paid interest on $1,390,000, and on
the rest no interest was paid, nor was there any provision there-
for.' In 1846 the State compromised with her creditors. For the
old securities she would substitute new bonds to the amount of
fifty per cent., and give to the holders, in lieu of the other half,
a lien upon the canal, canal lands, revenues, and lots. " In-
diana has thus," says a writer of the time, " assumed the payment
of three millions of dollars, for which nothing was ever realized by
the State. Not only were the avails of the bonds to a large
amount grossly squandered by the agents of the State in the con-
struction of its public works, but bonds to the amount of three
millions thrown away by mismanagement." '^

The notice of the surplus in Indiana can best be closed by
quoting the testimony of Hon. Hugh McCulloch, at a recent meet-
ing of the Washington Philosophical Society :

" Being invited by the Chair to participate in the discussion, he
said that in Indiana the application of the money deposited by the
United States had occasioned a long debate, which had resulted
in its division. One half, by means of a system of commissioners,
was loaned to individuals on land and mortgage ; the other half
was put into stock of the State Bank, with which the speaker was
at that time connected. In a financial crisis the first half was
practically lost, probably less than one twentieth part being recov-
ered ; but the loss was fortunately made good by the bank stock,
upon which dividends were regularly paid, and by which the in-

' Art. 8, § 2 ; i Revised St., 1852, 62.

''Acts, 1855, 161.

'Statutes, Davis Rev., 1876, 779. " The words lieretofore known and desig-
nated as the surplus revenue funds," are the words of the last. The plural
probably means to include the bank's share.

* See chap. xii.

^ Am. Aim., 1846, 2S7.

* I Bankers' Mag., 262.

SURPLUS REVENUE. 65

vestment was eventually doubled. Since the closing of the bank,
this money has constituted the school fund of Indiana." '

Kentucky Received $i,433,754-39-

Before the question of the deposit came up in the Legislature,
one member declared his intention of presenting a resolution to
appropriate part of the surplus revenue to African colonization.^
It is needless to say that this resolution was not adopted, if ever
proposed.

The deposit was accepted Dec. 16, 1836,' and disposed of by
the act of Feb. 23, 1837, which ordered that the surplus "be
properly invested." The profits arising from $1,000,000 were to
be " set apart and forever dedicated to founding and sustaining
a general system of public instruction," while the profits from the
remainder were to form a sinking fund to pay the interest on the
internal improvement loan and to redeem the principal thereof.*

The investment of the surplus under this act was to be as fol-
lows : First, in the purchase of 5,000 shares of stock in the Bank
of Louisville ; then f of the residue were to be paid on a pur-
chase of 5,000 shares in the Northern Bank of Kentucky as the
later instalments come in ; while the remaining f were to be paid
on the 10,000 shares subscribed by the State in the Bank of
Kentucky not paid for with State bonds. Among the conditions,
it was laid down that the banks must comply with the act within
three months, otherwise the surplus falling to them was to be
handed over to the Commissioners of the Sinking Fund. The
10,000 shares of stock in the Bank of Kentucky were set apart
and pledged as a fund for the repayment of the surplus when it
should be demanded by the United States.^

' Ne7v York Times, Dec. 31, 1883. The last clause is hardly accurate, as the
school fund of the State is about $8,000,000. "A part of" should follow
" constituted."

''New York Joitrnal of Commerce, Nov. 2g. 1836.

'Acts, 1836-7, 4.

* Acts, 1836-7, 319 ; Trotter, 236 ; Pickett, 220.

'Acts, 1S36-7, 319.

^6 SURPLUS REVENUE.

As Kentucky received only three fourths of what was expected,
the million dollar appropriation to education was reduced to
$850,000, with the provision that if the fourth instalment should
be paid, $150,000 should be added to this sum. This fund was
placed under the management of the Commissioners of the Sink-
ing Fund till the school board should be organized.'

By the act of Feb. 23, 1839, it was provided that the interest
which had accrued or should accrue beyond the present expenses,
should be invested in State internal improvement bonds or in
State Bank stock, as the commissioners chose.*

The conditions above referred to in reference to a purchase of
bank stock were not fulfilled apparently, for the investments were
not made as provided. In June, 1841, James Harlan, Secretary
of State, made a special report on the State Bank, and gave therein
the following particulars about the surplus : " The whole amount
of the Surplus Revenue of the United States received by the State
of Kentucky was $1,433,757.58. Of this $850,000 was set apart
as a permanent school fund and invested in internal improvement
bonds.' A portion of the dividends have been reinvested in the
same manner, and the accumulated amount now is $937,500. The
residue of the surplus was subscribed and paid into the Bank of
Kentucky, as a part of the fifth million in the capital stock of that
bank." '

The Commissioners of the Sinking Fund who had charge of the
part of the surplus devoted to education were frequently involved
in conflicts with the Superintendent of Public Instruction, and
the strife ended in an issue with the governor in 1850-1. " The
differences arose as early as 1840 on the refusal [of the Commis-
sioners] to pay the interest on the school fund consequent on the
result of the system of internal improvements upon which the
State had embarked, leaving a depleted treasury and an im-
paired State credit," An additional bond for accumulated

' Acts, 1837-8, 274 ; Pickett, ibid.

"Acts 1838-9, 355.

' These were State bonds with interest at five per cent. Eaton, 19.

* 5 Hazard, 64 ; also 60 Niles, 120.

SURPLUS REVENUE. 6/

arrearages was executed in 1848, representing the sum of S308,-
268.42.'

The income of the school fund was about $50,000 in 1839.'
But the organization of the system went on slowly, or rather there
was no system for several years. In 1840 the governor said :
" No school has yet gone into operation, as no law for enumerating
the children was passed till the last session of the Legislature.
Several schools will be organized the present year," '

There was urgent need of a good organization and efficient
schools," but the work was slowly done or not done at all. In
1847 Gov. Owsley said : " As yet for this great cause Kentucky
has done but little more than place a law in her statute book which

* See Pickett, 220. He gives here full particulars about the history and con-
dition of the State school fund. The executive referred to was Gov. Helm,
who affirmed that by the new Constitution the sinking fund was not chargeable
with this interest. 5 Bankers' Mag., 626. The act of Feb. 10, 1845, gave
some color to the refusal of the commissioners, for it reappropriated the $850,-
000 for schools and left out the clause referring to the sinking fund (see Acts,
1844-5, 45)- Ii^ addition to the failure of the internal improvements the Bank
of Kentucky declared no dividend in 1840 on account of a great fraud upon it,
perpetrated by the Schuylkill Bank of Philadelphia (see 4 Hazard, 167-72).
Usually the income of the sinking fund met all demands for interest and had
a large surplus left over for investment, but in 1840 there was a deficit of
$10,802, because there were no dividends from its bank stock. Harlan's Re-
port, 5 Hazard, 64 ; 60 Niles, 120. In 1841 there was a deficit in the State
treasury. 4 Hazard, 167-72.

^ 2 Hazard, 277.

'Gov, Wickliff's Message, June, 1840. 3 Hazard, 59 ; 58 Niles, 146.

* Bishop Smith, Supt. of Public Schools, stated in an address that of 140,000
children of school age, only 32,000 were receiving education ; also that under
the then existing system it cost about as much to educate the 32,000 as it would
to educate the whole 140,000 under the common school system. " In one of
the circuit courts the judge ascertained that not one of the fifteen persons sum-
moned as grand jurors could read or write his own name ! In another county,
in a public assembly of about fifty persons, not one could be found capable of
reading and attesting an instrument of writing." — 3 Hazard, 379.

It is fair to add that this report was pronounced most egregiously inaccurate
by the Frankfort Commomvealth, which asserted that there were vastly more
schools and scholars than there were said to be. — 59 Niles, 375. Of the value
of this statement I know nothing.

68 SURPLUS REVENUE.

has never been carried into effect, and almost justified the re-
proach that a system of education cannot flourish in a slave
State." '

In 1849 the school fund was stated to be $1,299,268.42 and the
interest $66,733.99, three fourths of which were "retained in the
treasury and appropriated by the State to its ordinary expendi-
tures." ^ It was, however, considered as borrrowed from the
school fund which thus rapidly increased in size, for these loans
were added to the principal which the State had borrowed on its
bonds.

In 1851 the State owed the Board of Education $1,326,770.40,^
which included the $850,000 of surplus, or most of it, and the ac-
cumulating interest thereon.

At first sight one might name Kentucky among those States
which have preserved a portion of the surplus to the present day,
and, technically, this would be correct, but the deposit was in-
vested in bonds issued to obtain money for improvements, and,
since the improvements did not pay, the interest on the bonds had
to be met by taxation ; consequently the people pay annually by
their taxes what is nominally the income of the surplus. This is
true of course only of so much of the surplus as was invested in
improvement bonds.

Louisiana Received $447,919.14.

The deposit was accepted March 13, 1837.^ By the act of Feb-
ruary 26, 1838, the treasurer of the State was authorized to apply
$355,000 to the full payment and extinguishment of the floating
debt of the State, due the different banks of this State, and of the
balance due by the State for its subscription of five hundred
shares of stock of the Barataria and La Fourche Canal Company.
From the residue of the surplus the treasurer was to pay the bal-
ance of the appropriations made by law and due to the College
of Louisiana, to Jefferson College, to Franklin College, to the
Covington Female Academy, and to the Penitentiary at Baton

' 73 Niles, 334. ^ Am. Aim., 1853, 294.

Am. Ahn., 1851, 273. " Acts, 1837, 74.

SURPLUS REVENUE. 69

Rouge. Whatever might be left was to be put to the credit of
the sinking fund and applied to the payment of State bonds due
July, 1839/

The next provision in regard to the surplus is in the 137th Ar-
ticle of the Constitution of 1852, which appropriated the interest
of the trust funds deposited by the United States under the act of
June 23, 1836, to schools. In consequence of this, we find among
the items of the State debt due the free school fund up. to
December 31, 1852: "Interest accrued during 1852 on the
United States deposit fund, $28,795.14.' This constitutional
enactment was repeated in the Constitution of 1864, Art. 144, and
in the Constitution of 1S68, Art. 139. The same provision was
made in the school law of 1853 ' and again in 1855.^ It is also
contained in the Revised Statutes of 1876.' The liability of the
State to repay the deposit is noticed by the State Com-
mittee of Finance, in 1844, with the remark that it will " never in
all human probability be repaid or demanded." " As the fund was
appropriated in 1839, these later enactments in favor of education
can hardly be said to be in reality appropriations of the surplus.
The money is all raised by taxation, and is called interest on the
surplus merely as a formality.

' Acts, 1837-8, 26. •* Acts of 1855, 429.

^ Am. Statist. Ann., 1854, 249. ' P- 342.

' Eaton, 20. ^ 66 Niks, 44-

CHAPTER VIII.

THE SURPLUS IN THE STATES.

Maine Received $955,838.25.

The Legislature accepted the surplus and pledged the faith of
the State for its repayment January 26, 1837.'

On the 8th of March following, an " Act providing for the dis-
tribution and repayment of the public money deposited by the
United States " was passed. It directed that the money be de-
posited with the cities, towns, and plantations, to be refunded in
sixty days after notice, the shares to be apportioned according to
a new census. If the towns did not wish to draw the principal
they might draw the interest instead. If any towns refused their
shares, the interest thereof was to be subject to legislation. The
treasurer could loan the shares of such towns as did not give
notice of their acceptance by May ist. The first instalment was
to be distributed on the basis of the distribution of the school
fund, and the second so that the aggregate of both should be
proportional to the population by the new census. It was further
enacted : " Any city, town, or organized plantation is hereby
authorized to appropriate its portion of the surplus revenue or
any part thereof for the same purposes that [for which] they have
a right to [appropriate] any money in the treasury from taxation ;
also to loan the same in such manner as they deem expedient on
receiving safe and ample security therefor." ^

Doubtless most of the money was distributed according to this
provision, but at this time the boundary between Maine and New
Brunswick was doubtful, and when an agent was sent into the
northeastern extremity of the State to take the census, he was

' Acts, 1837, 389. ^ Laws of 1837, 403-7.

SURPLUS HE VENUE. 7 1

arrested by the New Brunswick authorities. On this account the
estimated share of this district, $6,000, was kept back by the State
Treasurer. " It remained in the State treasury until 1S61, when
$5,000 of it were set apart as a separate school fund, the yearly
interest of which, at six per cent., is allotted to those towns for the
support of schools." ' Under the act of March 8, 1837, the town
of Biddeford at a legal town meeting voted to receive the money,
and that it should " be divided among the inhabitants of the town
according to families." The officials, however, who received the
money refused to apportion it among the citizens ; whereupon
one W, R. Hooper brought suit against them for his share. The
Supreme Court of Maine pronounced such distribution illegal, on
the ground that by the statute, the money was subject to such
appropriations only as were legally met by taxation, and that it
was illegal to raise money by taxation for distribution.^

March 29th, An amendment to the general act was passed to
the effect that the second instalment should be distributed on the
school fund ratio, and also the third if the census were not
finished in time, and that the remaining instalment should be so
apportioned as to bring the whole down to the basis of population.'

Not quite a year later, February 28, 1838, the towns were re-
leased from all obligation to return the money, and were em-
powered to distribute ii per capita according to the census of 1837,
or to use it like money accruing from taxation.^

Mr. Eaton says that partial returns for the years 1837 to
1839 show that $659,598 were expended for public schools.^
This seems too big an estimate, though no contemporary evidence
has been found that can be arrayed against it. Mr. Blaine has
said that : " In Maine they made an absolute per capita distribu-
tion of it among the entire population — a trifling sum to each." *
The present State Treasurer writes : " As a rule the surplus reve-

' Eaton, 21.

^ 2 Shepley in 14 Maine, 375-S2. '

' Laws 1837, 441.

^ Laws, 1838, 460.

° Eaton, 20.

"Letter to the Philadelphia Press, Nov. 29, 1883.

72 SURPLUS REVENUE.

nue was distributed per capita. There may have been some ex-
ceptions, but we have no information on that point in this office."
It would seem unlikely that, if so large an amount as Mr. Eaton
mentions had been devoted to education, the fact would have
escaped the notice of both Mr. Blaine and the Treasury Depart-
ment.

Maryland Received $955,838.25.

In his message, Dec. 28, 1836, Gov. Veazy advised the Legis-
lature to invest the money in some permanent and profitable stock,
and to apply the interest to the general purposes of the State till
the treasury was relieved, and afterwards to education. Though
it was not likely to be recalled, yet the State should be in readi-
ness to return it, and so had better appropriate the interest
only.'

The fund, after the acceptance and before the final disposal,
was " applied to discounting real paper at short dates." ^ On the
i8th of March, 1837, $274,451 was appropriated to pay the interest
on the public debt already created. The rest (1681,387.25) was
to be deposited in some incorporated bank or banks in Baltimore,
which should pay at least 5 per cent, thereon ; the interest was
then to be devoted to the support of common-school education,
being divided between the counties and Baltimore like the existing

fund.'

The Union and Franklin banks * were chosen, and the fund re-
ferred to the next Assembly for further disposition.^

By the act of March 17, 1838, $1,000 of the income, which was
$34,069.36, was to be appropriated annually for the education of
the indigent blind of the State. "^

A few days later an act was passed providing that the residue
of the income should be distributed yearly, " one half equally

' 51 Niles, 292.

"^ 51 Niles, 273.

"" Acts, 1836-7, ch. 220.

* Later the Bank of Baltimore was added to the list.— 57 Niles, 291.

^ 52 Niles, 82.

^ Acts, 1837-8, ch. 173.

SURPLUS REVENUE. 73

among the several (21) counties and the city of Baltimore, and the
other half among the same, according to population." '

The State, since this time has annually appropriated $34,069.36,
nominally interest on the surplus, but really raised by taxation,
for the support of schools. In 1852 it was stated : " There is no
common-school system in this State. In the city of Baltimore
there is a regular, organized scheme of public instruction ; but the
country districts have merely local primary schools, under the
direction of the several county commissioners, supported by a
county levy in addition to an amount afforded by a proportion of
the [school] fund." ^

It was a case where outside aid was not sufficiently supplemented
by local taxation. The principal of the surplus was wasted in ex-
travagant internal improvements.^

Gov. Grason said in 1840 that "the remainder of the surplus
might be considered as so much added to this State's means of
complying with its other engagements." The whole expenditure,
including the interest on the public debt, greatly exceeded the
annual receipts ; and the deficiency in the revenue was supplied
from the special deposits, which, if applied to that purpose alone,
would be exhausted in two or three years.*

One year later he announced that only $149,000 of the surplus
remained on deposit, while there was a deficiency of more than
$620,000 in the treasury. After using the rest of the surplus, a de-
ficiency would remain of about $470,000 to be provided for. After
that year they must face an annual deficiency of upwards of

' Acts, 1S37-8, ch. 285 ; Al. Aim., 1840, 237.

"^ Am. Statist. Ann., 1854, 267.

' " Unfortunately for this ill-fated State every department (from 1832 on) was
under the control of those who held opinions which had been condemned by the
judgment of the whole country. They refused to abandon altogether an ex-
travagant system of roads and canals that cannot be consummated in a country
like the United States where the population is scattered and sparse. We be-
hold [then] the little State of Maryland having 10,000 square miles of territory
and 318,194 white inhabitants staggering along with undertakings that would
task the financial resources of the whole kingdom of Great Britain." — Gov.
Thomas, Mess., Dec, 1842 ; 63 Niles, 314.

* Message, Jan., 1840 ; 57 Niles, 291 ; 2 Hazard, 177.

/4 SURPLUS REVENUE:.

$600,000.' As might be expected Maryland suspended payment
of the interest on her public debt January i, 1842.

Four years later, December i, 1845, the arrearages of interest
had amounted to $1,376,871.24.^

The surplus in Maryland was a temporary benefit to the State's
creditors but a permanent injury to the State. It stimulated ex-
travagance, increased the State debt,^ and had a demoralizing effect
upon the people generally.'' It was several years before the State
got out of the straits in which bad financial management had

placed her.

Massachusetts Received $1,338,173.58.

The Whig papers of Boston recommended the Legislature to
loan the deposits to the banks. ^

The deposit was accepted the 19th of January,' and disposed
of the 21st of March, 1837, as follows : The first two instalments
were to be deposited with the towns in proportion to their popula-
tion by the last census, the last two according to the population by
a new census to be taken in May, 1837.

The towns were bound to refund the deposit when the United
States Treasury called it in, but, meanwhile, they were to apply the
money or the interest on the same to those public objects for
which it is lawful to raise money, and for no other purpose. If
any town did not pay back the money within thirty days after a
call, an execution could be served against the goods of the in-
habitants therefor. $2,500 was to be reserved and loaned by the
treasurer of the commonwealth, the income of which was to be

^ 59 Niles, 291.

^ I Bankers' Mag., 747.

^ The debt in 1842 was at least $10,000,000 and by some estimated at $15,-
000,000. — 63 Niles, 313

* " Nothing has influenced more fatally the evil councils by which so many of
the States have become involved, than the delusive expectations, rekindled con-
stantly as fast as they are quenched, of pecuniary largesses from the National
Treasury for State purposes." — Gov. Thomas "hi Md., Dec, 1842; 63 Niles,
313. See also near the end of chap. xii. for a more extended extract,

^ Boston Advocate in Blair's Globe, Dec. 3, 1836.

" I Supplements to the Rev, Statutes, 15.

SUHPLl^S REVENUE, 75

and is paid as follows : March ist, to the treasurer of Marshpee
the income of ^i,ooo ; to the guardian of the Chappequiddick
and Christian Town Indians the income of $1,200, one half for
the benefit of the said Chappequiddick and Christian Town In-
dians, the other half for the benefit of the Indians of Gay Head ;
and to the treasurer of the Herring Pond Indians the income of
$300, all the said income to be for the purposes of common-school
education in these places, and these Indians to have no other ap-
propriation from this money.'

An amendment was soon passed providing that if any town re-
fused or neglected for six months to accept the money, it was to
stay in the treasury for future disposition by the Legislature."
This bill was pronounced by some a compromise and a bid for
favor.'

The towns made use of the money in various ways, the ma-
jority applying it for town expenses, ordinary and extraordinary,
In 1841, 36 towns devoted $6,625.95 to education, and in 1846.
44 towns applied $8,392.99 to that purpose.'' The appropriation
in 1840 — was $9,529.48.^ From these fluctuating figures it will be
seen that sometimes a town devoted the money to education and
sometimes did not.

Michigan Received $286,751.49,

Secretary Woodbury, in a communication to the House of Rep-
resentatives, Jan. 3, 1837, stated that " the payment of the share
assigned to Michigan would be postponed till some expression of
opinion should be given by Congress." ° Michigan was admitted

' I Suppl. Revised Stat., 20.

' Act of April I, 1S37, ibid., 23.

' The House did not agree on the bill they sent to the Senate because it was
the best, but because it was the only one they could agree on. It seemed to have
filled the minds of the members that the only way they could gain popular favor
was by voting to distribute it. The act exposed the towns to endless strife and
contentions. — Boston Courier (the exact date was lost).

* See Table in Appendix III.

' Report of Supt. Mann. 5 Hazard, 320. Also in Am. Aim., 1843, 208.

" 51 Niles, 297.

']6 SURPLUS REVENUE.

into the Union Jan. 26, 1837. The people, however, did not wait
for that formality, but straightway, after the passing of the deposit
bill, they accepted their share by the act of July 22, 1836.* The
share of the surplus falling to Michigan, having been duly paid
with the approval of Congress, was placed by the act of March
22, 1837, to the credit of the internal improvement fund as a loan,
to be returned to the treasurer of the State whenever the loan for
internal improvements should be obtained, or whenever required
by the Legislature.

Further, the board for internal improvements might loan any
money not immediately needed to any specie-paying bank for not
less than five per cent, interest payable semi-annually."

In a little over a year $80,000 of the surplus was passed to the
credit of the State, " to be drawn out according to law to defray
the current expenses of the State." ' A year later a second
$80,000 was drawn for the same purpose.'' In nine months
$100,000 more was credited to the general fund.^ The remaining
$26,751.49 "continued to form a part of the internal improve-
ment fund, and contributed to the works for which that fund was
provided." '

It is hard to see how the surplus was of any real benefit to
Michigan. It only relieved the inhabitants momentarily from the
burden of their own extravagance. Swept along in the tide of
reckless speculation which then carried every thing before it, the
people of Michigan had contracted a debt of $5,340,000 before
1838, when the population was less than 200,000. There seems
to be good reason to believe that the presence of the surplus
stimulated rather than checked their prodigality, for it was affirmed
early in 1839 that their appropriations, though reduced, far exceeded
the means of the State.'

1 Acts, 1835-6, 61. ''Acts, 1837, 269 ; Trotter, 342.

'Act, April 6, 183S ; Acts of 1837-8, 244 ; entered in Treasurer's Report,
Acts, 1839, 295. "Acts, 1839, 179.

^ Act, Jan. 30, 1840 ; Acts, 1840, 46 ; entered in Auditor's Report, Acts, 1841^
250. ° Deputy State Treasurer, 1884.

^ 56 Niles, 160. The Detroit Advertiser sz\A. : " The only practicable remedy
which we can perceive for the pecuniary embarrassments under which the State

SURPLUS REVENUE. J J

That Michigan's share of the surplus was largely wasted, to say
nothing of its effects in creating extravagance, appears altogether
probable from the words of contemporary writers." Like all the
Western States, they planned a great many works at such immense
expense that all their resources were used up before any thing was
finished, and so very much was lost. When it is remembered
that with a population of only 175,169 in 1837, mostly farmers
with little capital, in a new country, improvements were designed
whose probable cost would equal |i5, 000,000,^ some idea of the
wildness of these undertakings may be obtained.

When such methods of financiering prevailed, it would have
been a wonder if the surplus fund had not been wasted like the
most of the five-million loan.

Michigan failed to pay the interest due on her debt for some
years after the first instalment became due July i, 1843. In
Feb., 1843, ^^^^ Legislature "covenanted with the bondholders to
fund the interest till July, 1845, pledged the revenue from the

and the people thereof are laboring is time and retrenchment. It will go hard with
our spoil-loving rulers, but they must come to it. Necessity is a stern master.
They have exhausted the treasury — exhausted tlieir credit, now they have be-
come economists from mere necessity. It is time they should." — Niles, ibid.

* " This State has a debt of about five million and a half of dollars, and what
is peculiarly unfortunate the State has lost more than one third of the proceeds
of the stock which has been issued, by the infidelity and insolvency of those
with whom the' loans were negotiated [see 2 Curtis, 122] ; and even the amount
received has not been expended in such a manner as to yield revenue to any
considerable amount. The board of internal improvement in a recent report
say : ' We have expended or wasted three fourths of our five-million loan, and
what have we to show for it ? ' We have finished about forty, say fifty miles of
the Central, and about thirty-four of the Southern railroads, and there will soon
be completed the portion of the Clinton and Kalamazoo Canal between Roches-
ter and Frederick, and where are the profits to remunerate the State for this
heavy outlay?" — A. C. Flagg, Comptroller of New York : a report on State
debts. Am. Aim., 1842, 106.

■■'Early in 1842 Gov. Barry writes : " The system of internal improvements
projected in Michigan some years ago, when speculation was the mania of the
day, embraced about 596 miles of railroad, 233 miles of canal, and the im-
provement of five rivers. The probable cost would not have fallen short of
$15,000,000." — 63 Niles, 336.

78 SURPLUS REVENUE.

public works to the payment of the interest which should accrue
after that time," and voted a direct tax to supply deficiencies of
interest.*

In 1846 the Central R. R. was sold for $2,000,000, and the
Southern for $500,000.' The two cost $3,343,284.92.' The cir-
cumstances of Michigan's partial repudiation are detailed by
Curtis.

Mississippi Received $332,355.30.

The deposit was accepted May 2, 1837.' In 1839 the Legisla-
ture passed an act loaning $30,000 from the surplus revenue to
the Railroad and Turnpike Co. in the counties of Newton and
Lauderdale. . Three bonds of $10,000 each were executed there-
for, payable to the governor, after ten, fifteen, and twenty years
respectively. The money was to be spent in improving naviga-
tion in the Chickasawy River ; if all was not used the residue was
to be returned, and in case the United States called in the surplus
the bonds became immediately payable.' In reference to an act
supplemental to this, three Senators put forth a protest, saying :
*' By this vote of the Senate, they have in our judgment squan-
dered the public money upon a company of individuals engaged
chiefly in speculation, whose personal interest will be promoted by
the law in question ; while, on the other hand, the State will not be
benefited by the appropriation." °

Such are the meagre notices about the surplus in Mississippi
that the writer has been able to collect ; letters to the State of-
ficers brought no reply, and therefore he is thrown back upon
conjecture, which in this case is not difficult. To judge from the
single instance quoted it would seem probable that the money was
loaned. Notwithstanding this probability, a consideration of the
state of the finances in Mississippi leads to the belief that it was

1 2 Curtis, 123.

' Am. Aim., 1848, 310.

' Am. Aim., 1847, 294.

* Laws, 1824-3S, 590.

"Act, Feb. 15, 1839 ; Acts, 1839, 365 ; Democratic Rule, 112.

'■■ Democratic Rule, 122 ; quoted from Senate Journal of that Session, 350.

SURPLUS REVENUE. 79

used for the State expenses, or was squandered during those times
of reckless financiering. We find it once mentioned among the
items of the State debt, "$382,335.30 deposited by the General
Government, and which is liable at any time to be recalled.'

Now Jan. i, 1838, there was a surplus or balance of cash in the
treasury amounting to $279,6 13.3 ij-, not including the sinking
fund, the seminary land fund, or the Jackson City lot notes. Be-
sides these items and the above-mentioned cash balance, the
State held stock in the Planters' Bank for at least $2,000,000,
which before that time yielded ten per cent, per annum. ^ Though
nothing is said in the connection to lead us to suppose that this
cash balance was part or contained part of the surplus, yet it is
not at all unlikely.

In 1840, however, the treasury was empty — so empty that there
was nothing to pay the Legislature with, whereupon that body dis-
banded. '

In Jan., 1842, the treasury had receipts of the Attorney-General
for claims on the Brandon and other broken banks for the

sum of $233,102

Also notes of the insolvent Miss. R. R. Co. , . 63,030

$296,132
There were some other notes to raise the total to about $298,000,
but these securities were not worth five per cent, on their face
value. In addition the treasury had thirty-four cents in specie,
while the " real and pretended claims against the State exceeded
the sum of $8,000,000." *

Under such circumstances and in the absence of adverse testi-
mony it seems safe to say that the surplus was applied to State ex-
penses, and at a time, too, when the State finances were too reck-
lessly managed to permit of economy. It does not appear unjust,
then, when we look at the only notice we have of any part of the
surplus and the disposal thereof, and at the way the State finances

' Democratic Rule, 106.

"^ Democratic Rule, 218-220 ; from Senate Journal, 1843, 25.

' Democratic Rule, 166.

* Democratic Rule, 218-220.

80 SURPLUS REVENUE.

were carried on at that time, to say baldly that in Mississippi the
surplus revenue was utterly wasted.

Missouri Received $382,335.30.

By the act of Feb. 6, 1837, the Legislature set apart all
money which might be received under the act of June 23, 1836,
for investment by the governor in the stock of any bank which
the State might incorporate ; and all the interests and profits that
should accrue thereon were to be applied to the use and support of
common schools. The fund was to be styled the common-school
fund. The interest was to be added to the principal till the fund
amounted to $500,000 or more, after which time the income was to
be used for the payment of " teachers in common schools," as the
General Assembly might direct by a system of common schools.
If the surplus should ever be recalled after it was invested in any
bank stock the State should issue bonds to such a bank. These
bonds were not to pay over five per cent., and in other respects
were to be like previous bonds.' The bank chosen was the Bank
of St. Louis, chartered Feb. 2d, with a capital of $5,000,000.*
This system of common schools was established by the act of Feb.
9, 1839."

Among the funds we find enumerated : "All moneys heretofore
deposited or which shall hereafter be deposited with this State ac-
cording to the act of June 23, 1836." ' As in the first act the fund
must accumulate till it reaches $500,000. There were many other
regulations, as can be seen -from the length of the act. Among
them may be mentioned the restriction limiting the yearly ex-
penditure to the income of the previous year, and further, forbid-
ding it to exceed sixty cents for each white child between six and
eighteen years old residing where there was a school organization
entitled to a share in the distribution.^

' Acts of 1836-7, 137.

"^ Acts of 1836-7, 13.

^ Acts, 1838-9, 112-149.

" Repeated in Acts, 1853, 147 ; also in 2 Rev. Stat., 1855, 1414.

* Acts, 1838-9, 115.

SURPLUS REVENUE. 8 1

The portion left over in 1843 was borrowed for a year by the
State to be repaid, apparently with interest at six per cent., Feb. i,

1844.'

In the Constitution of 1865, Art. ix.. Sect. v. : "All moneys,
stocks, bonds, lands, and other property now belonging to any
fund for purposes of education " were constitutionally confirmed
as parts of the school fund. Section vi. says : " No part of the
school fund shall ever be invested in the stock, or bonds, or other
obligations of any State, or of any county, city, town, or corpora-
tion." All such stocks then held were to be sold and the proceeds
invested in United States bonds.^

The bank which we have mentioned was under the patronage
of the State, which subscribed to three tenths of its stock of
$5,000,000. If we are not mistaken, it was later styled the Bank
of the State of Missouri. While the surplus was invested in this
stock, the income was variable, but averaged about 5-^ per cent.
annually for the first eleven years. The fund is now invested in
six per cent. State bonds."

Missouri, then, is one of the half dozen states which have saved
the deposit to the present day.

' Acts, 1842-3, 12.

"General Statutes, 1865, 40-1 ; also in 2 Rev. Stat., 1879, 1397.
N. B. — In Myers' Supp. to Wagner, p. 424, the bonds of the State of Missouri
are made exceptions to this rule.
' Eaton, 22.

CHAPTER IX.

THE SURPLUS IN THE STATES.

New Hampshire Received $669,086.79.

Governor Isaac Hill, in his message, December, 1836, recom-
mended that " the money he loaned on undoubted security," and
that the interest, which he contended was all that fairly belonged
to the State, be exclusively applied towards the discharge of the
ordinary expenses of government.' In another place the long
legislative struggle over the deposit has been noticed. In gen-
eral, the distribution bill seems to have been unpopular.' The
surplus was accepted, however, January 11, 1837, and on the
13th a bill was passed which provided that it should be deposited
with the towns on this compound ratio : one half according to the
new proportion for the assessment of public taxes to be made at
that session, and one half according to the number of ratable
polls for the year 1836. The faith of the towns was to be
pledged for the return of the money, which they might loan but
not spend or appropriate.^

1 Blair's Globe, December 3, 1836, from the Albany Argtis. The passage is
introduced thus: "Governor Hill, with an eye to the true interest of the
distribution bill, and with a view to retain the share of the State within the
reach of the authorities responsible for its repayment, recommends," etc.

'^ " A minority report was made [in the Legislature] in which reasons were
urged against the acceptance of the money, and recommending the adoption of
a resolution, declaring that the distribution of the surplus is not only unconsti-
tutional, but highly dangerous to the liberties of the people." — Mercantile
Journal, in the Boston Courier, December 15, 1836.

The distribution bill, according to some, would seem to have opened the way
for the political promotion of Franklin Pierce. He was elected Senator by 108
votes out of 160, and the following comment shows the connection of this event
with the " Distribution" : " Mr. Page, the present incumbent, seems to have
given offence by voting for the distribution bill." — The New Yorker, December
24, 1836. ' Laws, Nov. Sess., 1836, 231.

SURPLUS REVENUE. 83

It is noted in Niles that the towns of Haverhill and Newport
voted to receive their portions in specie.' A year and a half later
the act was amended to the effect that the moneys could be loaned
or appropriated for any purpose for which the towns could lawfully
raise money. '^

July 4, 1S39, an act was passed authorizing any town to trans-
fer or convey to the New Hampshire Asylum for the Insane its
share of the surplus revenue, on condition that the institution
should be located in such town. The towns were not released
from their liability.' In two years it was made " lawful for any
town in this State, at a legal town meeting, to make any disposition
of the public money as, by a major vote, said town should deter-
mine." * According to the Revised Statutes adopted December
18, 1842, the towns might, at a legal meeting, make such disposi-
tion of the money " as should be deemed equitable and ex-
pedient." They were still accountable if the United States should
demand the money. " In case of such a requisition the treasurer,
on a warrant from the governor and his council, shall pay it from
any money in the treasury ; and if that is not sufficient, he shall
raise a loan, at not more than six per cent, interest, for that pur-
pose." ^ It seems probable that a considerable, if not a large,
part of the surplus was distributed. °

> 52 Niles, 48. " Act, July 4, 183S ; Acts, 1838, June Sess., 355.

'Acts, June Sess., 1839, 38. The Asylum was located at Concord. — Rev.
Stat., 1842, 55. " Act. July 2d ; Acts, 1841, 538.

' Rev. Statutes, 1842, 55 ; Gen'l Statutes, 1867, 52.

^ Prof. R. E. Thompson says : " New Hampshire illustrated extreme demo-
cratic principles by distributing the money among her citizens," but this state-
ment is rather too broad, as is shown in the text.

The following are of interest : " Dividing the Stirpbis in New Hampshire.
" In Portsmouth, N. H., the inhabitants voted to divide that portion of the sur-
plus revenue which fell to that town, per capita — the sum due to every man,
woman, and child in the place being between two and three dollars. That vote
is now in course of execution. An agent has been appointed and has received
the money for distribution ; but about two hundred suits have been commenced
against him as the trustee of individuals owing small sums, and he is placed in
rather an embarrassing situation.

" In Gilford (the Exeter iV^wj-Zd'/^^r states) the surplus or a part of it hav-

84 SURPLUS REVENUE,

About fifty towns seem to have kept the money invested, if we
may judge from the appropriations for schools fifteen or more
years ago.'

Mr. Eaton estimates that about $i,8oo a year has been derived
from the surplus for school funds, or about five and a half per
cent, of the annual interest at six per cent."

"There still remains in the State treasury the sum of $1,009.44
with the accumulated interest of $1,723.82, which was assigned to
sundry unincorporated places and where there was no one to re-
ceipt for it." The treasurer's books "do not even show the
amounts paid to the several towns." '

New Jersey Received $764,670.60.

New Jersey accepted the deposit November 4, 1836," and Gov-
ernor Dickerson recommended that it be added to the school
fund.^ By the act of March 10, 1837, the money was appropriated
among the several counties according to the ratio of the State tax
paid by them ; chosen freeholders were to pledge the faith of the
county on receipt of the trust, and were empowered to loan and
reloan the money upon bond and mortgage or other good and
sufficient security, as should seem to them safe and proper. Men
of their own county were to receive the preference among the
applicants for loans. The freeholders, further, must sue for
and recover the same with interest in their corporate capacity,

ing been expended, the selectmen decline to borrow, as instructed to do by the
vote of the town, so much money as will make good the deficiency — having
some not very unreasonable doubts of their legal right to borrow money for the
purposes of distribution." — 5 Hazard, 186.

These little men copied well the example of the great men at Washington,
who wanted to borrow money to distribute as the fourth instalment.

' See Table in Appendix IV.

^ In the year 1848-9 the income from the surplus among the school funds
was $2,500 (Am. Aim., 1850, 231) ; in 1860-1, $1,512.06 ; 1861-2, $2,460.51
(Nat. Aim. and Ann. Record, 1864, 279).

^ Letter from the treasurer.

* Acts of 1836-7, 10.

* Boston Courier, January 19, 1837, and Revision of New Jersey, 1131-4.

SURPLUS REVENUE. 85

and apportion and pay the interest to the several townships
in the above ratio of the State tax, for the benefit of said
township or the inhabitants thereof. The freeholders were to be
paid by the day in no higher proportion than for other services.
The penalty for embezzling was to be a fine not exceeding $1,000,
or imprisonment not exceeding five years, or both. If the board
of chosen freeholders should neglect or refuse to pledge the faith
of the counties, the money should be loaned for the benefit of
the counties, at their own risk ; the freeholders also were to
publish an annual report in the chief county paper of all their
transactions.'

Two years later Mercer County was formed, and received its
share of the surplus from the counties out of which it came. The
interest of its share was to be paid to the townships in proportion
to the county taxes they paid.°

This fund was henceforth spoken of as " State property not
now productive, consisting of the surplus revenue lent to the
counties without interest." ^

It is probable that more or less of the income was devoted
to the support of schools from the first. In the year 1861 $30,-
505.76 of the school money was obtained from interest on the
surplus.*

Mr. Eaton estimates that $15,000 a year was added to the
school income up to 1852 from this source, and from 1852 to 1867
about $30,000 a year.^ In 1867 the whole income of the fund was
appropriated to schools in " an act to establish a system of public
instruction." Art. ix. Sect. 77, reads: "Be it enacted — That
the several townships of the State are authorized and required to
appropriate the interest of the surplus revenue received by them,
and from other funds not raised by tax, such sums for the support
of public schools as they shall order and direct at their annual
town meetings." '

The income for education from the surplus was $349,313.18 in

1 Acts of 1836-7, 432. ^ Acts, 1839, 158 ; Revis. of N. J., 1131-4-

' Am. hXm., passim, 1852-61. * Nat. Aim. and Ann. Record, 1863, 422.

^ Eaton, 23. ' Laws, 1867, 378 ; Revision of N. J., 1086.

86 SURPLUS REVENUE.

the eleven years 1866-77, or an average of $31,755.74 a year,' In
1876 it was $30,523.54.'' The smallness of this sum is explained
and the condition of the fund stated in the following extract from
a letter from the State Superintendent of Schools, Mr. E. A.
Apgar : " I think there is not a county in the State where the
fund remains intact. It has been used for various purposes, prin-
cipally for the erection of county buildings and in the payment of
war bounties. Sixteen of our twenty-one counties continue to set
apart every year out of the county funds amounts equal to the
interest that would be derived if the fund continued to draw
interest. That which is appropriated, therefore, as interest of the
surplus revenue fund, is really raised by taxation, and schools,
therefore, cannot be said to receive any benefit from the fund."

New York Received $4,014,520.71.

The deposit was accepted Jan. 10, 1837, and was ordered to be
deposited in the banks paying the highest interest.^ By the act
of April 4, 1837, the money was apportioned among the counties
according to population, to be loaned out on real estate ; loan
commissioners to manage the fund were to be appointed by the
governor and confirmed by the Senate ; the lands on which
mortgages were taken must be worth double the amount of the
sum loaned, exclusive of buildings, and of the value of the rent in
perpetuity, if any were charged thereon ; the borrower must have
a title in fee, and the land must have been improved. The com-
missioners must give a full report the first Tuesday in each Decem-
ber. The interest was to be at seven per cent. Outside of New
York City the sums loaned were not to exceed $2,000, or to be less
than $200 ; within the city the limits were respectively $5,000 and
$500. The commissioners were paid as follows : for loaning
$25,000 or less, f of i percent.; on further sum of $25,000 or
less, \ of I per cent.; for loans amounting to more than $50,000,
\ oi \ per cent, on the whole, except in New York City, where
upon sums exceeding $50,000 the fees were to be ^ of i per cent.

' Eaton, 23. 2 Raum, Hist, of N. J., 294.

' 3 Edmonds, 75 ; 3 Fay, 349.

SURPLUS REVENUE. 87

When the repayment should be called for the comptroller was to
issue State stock on the most favorable terms to raise the money.'
Under this law the State, like Indiana, loaned the fourth instal-
ment in anticipation of its early appearance.'

By an act supplementary to this general act, the comptroller was
authorized to invest any money of the " United States Deposit
Fund," as it was called, that might be in the Treasury, in State
stocks, loans, or bonds of the United States.^ The losses of the
principal were to be charged on the income. The power thus
given to the comptroller has been a very salutary one in the history
of the fund, as will appear later, and this direction about charging
losses to interest has been the only way by which the fund has
preserved its original size. In 1873 $100,000 of the income was
transferred for this purpose."

By the act of May 2, 1864, the commissioners were authorized
to invest any moneys on hand in county bonds issued to pay
bounties to volunteer soldiers.^

The Legislature in disposing of the interest on the fund followed
closely the general recommendations of Gov. Marcy."

By the act of April 17, 1837, $110,000 was appropriated to

' 3 Edmonds, 78 ff. ; 3 Fay, 350 ff. The act takes up twenty pages in Edmonds.

' " The fourth instalment of the United States surplus revenue is still with-
held. The portion of that instalment due this State is $1,338,178.57. Relying
upon prompt payment of that instalment, the State has loaned an equivalent
sum to her citizens. I cannot doubt that you will insist upon the fulfilment of
the pledge of the Federal Government, and will at the same time protest against
the withdrawal of the instalments already received." — From the Message of
Gov. Seward, Jan., 1840. 2 Hazard, 49 ; 57 Niles, 323. There was nothing
half-way about Seward's plans of distribution (see page 42, note 2). On the
pledge or contract theory of the deposit see page 43. So far from having
$10,000,000 surplus to give away, the Government was $5,000,000 in debt, but
that made no difference with the distributionists.

' 3 Edmonds, 117. ■• 3 Fay, 367. " 6 Edmonds, 303.

^ Gov. Marcy recommended that while the deposit remained, $110,000 an-
nually be devoted to common-school education, that a liberal amount be given
to academies in a way to increase both the literature fund and their annual share
of money, and that the remainder of the income of the deposits be added to the
capital of the common-school fund. — Blair's Globe, Jan. 10, 1837.

88 SURPLUS REVENUE.

common schools, to be distributed like the existing school moneys ;
and school districts, to receive their shares, must maintain a school
for four months in the year instead of three, to be kept by a duly
qualified teacher. The first distribution was to take place in
1839. $55,000 was to be distributed in the same way ; for three
years it was to be used in providing libraries for districts, but after
that time it might be used for libraries or teachers' pay at the will
of the district. $28,000 a year was to be added to the literature
fund for academies under certain conditions. The residue of the
income was to be added to the capital of the common-school
fund.' Later a constitutional provision was made for adding
$25,000 annually to the common-school fund.

The income of the fund varied quite widely from $237,304 in
1844 to $286,950 in 1854.^ The reports of each year were given
in the old American Almanac of the second year following as
long as that annual was published.

The appropriations have been changed from time to time, and
were last year as follows :
To academies, for instruction of common-school

teachers $i7)585-99

Academic examinations ...... 7)985.17

Transferred to capital of common-school fund . 25,000.00
Transferred to the revenue of the same for divi-
dends to common schools .... 75,000.00

Transferred to the literature fund revenue for divi-
dends to academies ...... 28,000.00

Transferred to the capital of the fund for diminu-
tion of loans under foreclosure of mortgages . 3,288.79
Premiums, interest, and commissions on securities

purchased 134,634.77

Transferred to the revenue of the school fund, for

deficiency 57,581.88 '

The reduction of the amount appropriated for common schools

* 3 Edmunds, 96 ; 3 Fay, 351 ff.

'■' In 1883 the income properly so-called was about $200,000.

^ Comptroller's Report of January, 1884.

SUIfPLUS REVENUE. 89

to ^75,000 was in accordance, it appears from the Comptroller's
Report, with chap. 179, JLaws of 1856.' The provision of $55,000
annually for district libraries was in force in 1874, but seems to
have been discontinued.^

Though the state of the deposit fund is annually reported in
New York, the reports appear rather too favorable. In some
ways the fund has been an embarrassment.' Again the fund looks
safe when it is really in danger of suffering great losses. Mr. F.
P. Olcott, of New York, Comptroller of the State in 1877, has
kindly communicated the following : " On assuming the
duties of Comptroller in 1877, I determined to look into
the condition of the fund, and to that end I sent ex-
aminers to ten or fifteen counties selected miscellaneously.
The details of these examinations were never published in
report form, but were referred to in my report to the Legisla-
ture, transmitted January 2, 1878, in the words following : ' As
far as the investigation instituted has gone, it demonstrates the
utter insecurity of the fund. In almost every particular the law is
violated — money is loaned upon property not worth double the
amount of the mortgage, aside from improvements.* Second and

^Comptroller's Report of January, 1883, 67. If the treatment given New
York seems meagre in comparison with that given some smaller States, it is to
be remembered that each comptroller's report presents statements of the surplus
and its use, so that it is an easy matter for anybody to inform himself on the
subject. "3 Fay, 117.

' " It is loaned out by the State in small sums on real-estate security, and is
cared for by no less than fifty officers in the various counties, who are appointed
by the Governor on confirmation of the Senate, each of whom bears the high-
sounding title ' Commissioner for Loaning Certain Moneys of the United States
Deposited with New York.' The most frequent duty of these officers is the
collection of a dollar fee on each real-estate search, as no title is perfect without
a U. S. Loan Commissioner's search certificate that the property has not been
in debt to this fund, whose records are not with the usual records of titles and
encumbrances. In New York the U. S. Fund has become an annoyance and
embarrassment." — An anonymous writer in the American Protectionist for
June 9, 1883. He says he was once a commissioner.

* Cases have been known where the loans were made on timber lands whose
value was in timber. This was then cut off and the mortgage suffered to fore-
close to the loss of the State,

SURPLUS REVENUE.

third mortgages are taken. Searches are not made. Minutes are
not kept. The supervisors whose duty it is to examine the fund
annually in the different counties and report to this department its
condition, in the majority of cases fail to report. Forged and
fictitious mortgages have been taken, and during the past year two
of the commissioners — one in Jefferson Co. and the other in
Chemung Co. — have absconded, and have been found to be de-
faulters to the fund in considerable sums. In one county alone
property upon which the commissioners had loaned ^49,000 has
been advertised for sale the past year on account of non-payment
of interest, of which amount the State bid in $33,500. It is clear
to my mind that the control of this department over the fund is
too remote to be of use in its management, or to be of satisfaction
to the Comptroller. Considerably more than $3,000,000 ' of the
principal of the fund is invested in mortgages, and the control of
this large sum is in the hands of men more frequently chosen for
political considerations than from any peculiar fitness for the
duties imposed on them. In view of the facts recited I recom-
mend that legislation be had abolishing the office of loan com-
missioner, and providing that the mortgages in their possession,
with the records, be transmitted to this department, and the fund
with its responsibilities be placed in the hands of the Comp-
troller.' "

This recommendation was repeated in 1879 and 1880. The
Comptroller of the State in the Report of January, 1884, urges very
strongly that as fast as loans become due, the commissioners
should be compelled to forward both principal and interest to his
department. " For the safety of the fund this is now absolutely
essential." " The law requires loans to be made on the best of
security, at six per cent, interest. This cannot now be done."

Therefore much money lies idle in the hands of such commis-
sioners as refuse to return it. The losses and expenses, he says,
have, for the past thirty years, been over $29,000 a year.

" The State has to-day," he goes on, " thousands of dollars in-

* The amount invested in mortgages and county bonds Sept. 30, 1883, was
$2,352,832.26 which is $220,000 less than it was the year before.

SURPLUS REVENUE. 9 1

vested in farms, the result of foreclosed loans, that will not sell for
a third the principal and interest due." *

These testimonies cast a shadow over the figures that look so
well. In New York we may say that the income of the surplus
has been well used, but the principal badly managed.

North Carolina Received $1,433,727.39.

The deposit was accepted Jan. 11, 1837, and was deposited in
the banks of the State for safe-keeping, not being subject to draft
save by the special order of the General Assembly, or unless the
safety of the same should require it.*

Gov. Dudley recommended that the principal be employed for in-
ternal improvements, and that the income be devoted to the estab-
lishment of common schools, or some other object; he also declared
that the tariff ought to be modified so as to lessen the revenue.'

In "An Act to Aid Internal Improvements," which was passed
that year, are found enumerated among the resources for that pur-
pose : " Besides the funds heretofore set apart for internal im-
provements, all the surplus revenue, after deducting : the sum of
$300,000, which is to be devoted to the redemption of the public
debt of this State ; the sum of $300,000, which is to be paid for
stock subscribed in the Bank of Cape Fear ; * and that portion of
the said surplus which is to be added to the literary fund, and to
be applied to draining the swamp lands." ^

All that we need to clear up this is the amount appropriated for
draining the swamp lands, which was $200,000.®

In accordance with this law we find : " Among the receipts of
the literary fund — cash : That part of the surplus revenue ap-
propriated to this fund by the last Legislature for the subscription

' Comptroller's Report, 28.
' Laws, 1836-7, 305.

* 51 Niles, 209.

* This appropriation was by the act of Jan. 23, 1837. Acts, 1836-7, 6.
° I Revised Statutes, 1837, 349.

* Fayetteville Observer vc\. Am. Aim., 1838, 231. I mention this authority to
call attention to the fact that the other statements there made do pot accord
with the notices in the original authorities.

92 SURPLUS REVENUE.

for stock in the Bank of Cape Fear, and for draining the Swamp
Lands of this State, $500,000." ' Among the receipts of the in-
ternal improvement fund we find — " Cash : Being part of the
surplus revenue S533'757-39-"^ Of the $400,000 remaining, $300,-
000 was applied to the debt as explained below, and $100,000 was
used to pay the civil and contingent expenses of the State by the
act of Jan. 27, 1837.^ The $300,000 applied to the debt was
made use of as follows : $300,000 worth of land scrip had been
sold to the Secretary of the Treasury of the United States for the
use of the Cherokee Indians. The governor was now authorized
to appoint a commissioner to buy this back, and to do this the
governor was authorized to draw on the banks for a part of the
surplus, not exceeding $300,000. The scrip was to be re-issued
in case the United States called for the surplus.*

We can now make a tabulated statement of the items :
ist. To defray civil and contingent expenses . . $100,000,00
2d. " For the payment of stock in the Bank of
Cape Fear, subscribed for by the president
and directors of the literary fund " ^ . . 300,000.00
3d. " For draining the swamp lands of the State
under the directions of the Board of Litera-
ture " . . . . . . . . 200,000.00

4th. To redeem the Cherokee land scrip . . 300,000.00
5th. Added to the internal improvement fund . 533)757-39

S^433,757-39
During 1837 the Board of Internal Improvements invested

^ Treasurer's Report for 1830-9, in Acts of 1838-9, 203. ^ Ibid., 205.

^ Acts, 1836-7, 167 ; Treasurer's Report, 200.

* Act, Jan. 21, 1837 ; Acts, 1836-7, 307; Treasurer's Report, 200. In the
Treasury Report of Dec, 1840, a full quotation from which was kindly sent me
by the State Treasurer, this transaction is referred to in other words which may
throw light upon it. The item reads : " For the redemption of the public debt
due the United States, in trust for the Cherokee Indians, created for the purpose of
paying the State's subscription for the stock in the Bank of the State of N. C,
which stock constitutes a part of the fund belonging to the Board of Literature,
$300,000."

^ These two items are worded as in the Treasurer's Report of 1840.

SURPLUS REVENUE. 93

$300,000 of their part in stock of the Wilmington and Raleigh
Railroad, and apparently loaned the residue.' Before 1841, how-
ever, the whole of their share had been put into the railroad.'
All of the surplus, except the $100,000 devoted to State expenses,
was a part of the educational fund.'

In 1840 Governor Dudley recommended a change of manage-
ment in the literary and improvement funds, by which their
resources should be handed over to the banks of the State, and of
Cape Fear, for which the banks would make a large loan to the
Wilmington and Raleigh, and Raleigh and Gaston Railroad Com-
panies. He said that the most of the counties had adopted the
common-school system, and that a few had received the State's
quota of money. The want of schoolmasters was the only com-
plaint that had reached him. This was the universal complaint
at that time in States beginning to form school systems. Further,
he pronounced the acts of 1836-7, creating the Boards of Internal
Improvement and of Literature of North Carolina, very defective,
and in great need of revision. Large sums of money were at their
disposal, which they were required to invest in bank stock, and to
lend to individuals and corporations. These funds were daily
increasing by appropriations, interest from loans, and bank divi-
dends. If it were intended to establish a loan office, necessary
provisions should be made. " It certainly never could have been
intended," he adds, " to convert the executive into a loan office,
occupying more of the attention and responsibility of the gov-
ernor than all his other duties combined, and diverting him from
the higher and more enlarged trusts committed to his care."
These funds ought not to be loaned, but invested.*

The Cape Fear Bank investments were good, for the bank paid
semi-annual dividends of 3, and later of 3^^ per cent, on the

1 The item among the disbursements of 1837 of the Board reads: "Cash
paid W. and R. R. R., being a subscription of stock under an act of the last
Legislature, $300,000 ; loaned by the managers, $549,450. — Treas. Rep. Laws.,
1836-7, 206.

" Treas. Report of December, 1840.

' Letter from the treasurer.

" 4 Hazard, 7 ff.

^4 SURPLUS REVENUE.

stock owned by the literature fund.' The progress of the school
system was slow at first, but by 1855 it was growing rapidly
into efficiency.^ The experiments of North Carolina in internal
improvements in general were not a success financially.^

The treasurer of the State writes : " The investments for the
benefit of the educational interests of the State were considered
wise and judicious, and yielded before the war handsome divi-
dends. The results of the war rendered all of them unavailable,*
except the stock in the Wilmington and Raleigh (afterwards
known as the Wilmington and Weldon) Railroad Company. The
stock in this company was sold in 1869 by the State Board of
Education, composed of State officers elected under the recon-
struction acts, [at what was] supposed by them to be a fair value
[valuation], viz., $148,000, and invested in worthless special tax
bonds, now not considered as legal obligation of the State. In
fact, the people have repudiated them, in view of the questionable
authority under which they were issued. ... It appears
that the original investments were made solely to advance the
educational enterprises and interests of the State, the loss of
which, for the most part, is attributable to the results of the war,"

1 Treas. Report, 1848 ; Acts of 1848-9, 11-13. Treas. Report, 1850 ; Acts
of 1850-1, 13-15-

^ Am. Aim., 1858, 258.

^ " Nearly all the State debt was contracted in aid of internal improve-
ments, directly or indirectly. Some of the efforts to give such aid have resulted
disastrously, and in others the agents of the State wasted the funds." — Hunt's
Year-Book, 1871, 161.

* In 1869 it was stated that about one half of the literary fund had been
swept away by the war. — American Year-Book, 424.

CHAPTER X.

THE SURPLUS IN THE STATES.

Ohio Received $2,007,260.36.

The deposit was accepted December 19, 1836.' By the act of
March 28, 1837, it was directed that the surplus be divided among
the counties in proportion to the male population above twenty-
one years of age. It was to be loaned to internal improvement
companies on good security, or the commissioners might buy bank
stock, or loan to the county a sum not exceeding $10,000 for
public buildings. These loans were to be at six per cent., pay-
able semi-annually in advance. Loans might also be extended to
the State at six per cent, per annum. If the counties failed to
take all the money, the auditor might loan the rest to the canal
fund at six per cent, interest, and in that case he must pay over
to the school authorities five per cent, yearly. Further, all interest
accruing on these county loans up to five per cent, was to be paid
for schools in the counties according to the proportion of children
of school age therein. Every January the commissioners must
publish full particulars of their acts in some county newspaper of
general circulation. No loans were to fall due later than January,
1850, at which time the principal should be subject to the order of
the State Treasurer to pay the canal debt, unless some other dis-
position were made of it by the Legislature. If the State should
make this use of the money, there must be a provision that five
per cent, interest on the sum be distributed yearly among the
counties for the support of common schools. The fund must be
reapportioned in 1839, ^^^ ^^ every subsequent enumeration.

Any amount of income exceeding the five per cent, to be paid

' 35 Statutes, 4.

96 SURPLUS REVEATUE.

to schools was to belong to the county.' This provision was
altered March 19, 1838, so that this excess should be invested
profitably for a school fund, internal improvements, or for build-
ing academies.''

There was a further provision in the first act that the counties
should be held liable for the five per cent, for schools, any defi-
ciency to be made up by taxation. This was repealed March 27,
1841,^ and immediately re-enacted, making the deficiency charge-
able on the grand levy.''

March 13, 1843, an act to pay domestic creditors of the State
was passed. It empowered the commissioners of the canal fund
to borrow on the credit of the State a sum not exceeding $1,500,-
000, to pay the amounts due the contractors of public works ;
bonds were to be issued for this purpose, and to redeem these
bonds the surplus revenue was appropriated with some other
resources.

The commissioners were to pay five per cent, to the school
fund, and one per cent, to the counties on the amount paid in by
the counties.^

These bonds were known as the seven-per-cent. loan, payable
January i, 1852. Besides being pledged to redeem this debt, the
surplus was also pledged for the redemption of the turnpike
bonds, payable in 1846." It is also mentioned somewhat later as
applicable to the payment of the debt in general.'' Under this act
the counties began to pay in the surplus, but quite slowly at first.

1 35 Statutes, 97. Statutes of Ohio, 1841, 881-9. Here are quoted various
amendments. This volume contains every thing to date.
' 36 Statutes, 7g.
^ 39 Statutes, 41 ; St. of O., 1841, ibid.

* St. of O., 1841, 891.

* 41 Statutes, 80. A full list of the laws about the surplus is given in the
Appendix to Swan's Rev. Stat., Derby's Ed., 1854, p. 1043. The last clause
mentioned above doubtless means that the counties were to receive one per cent*
on the sums paid in before they were due {i. e., before January, 1850), the inter-
est to stop at that date. The text of the law is inaccessible at the present, or I
should have verified the reference.

" Aud. Report, i Bankers' Mag., 438 (1846).
^ 5 Bankers' Mag., 203.

SURPLUS REVENUE. gj

After tlie money became due, which was on January i, 1850,
"except with certain balances not due to the State till 1852," the
counties must pay 6 per cent, on what remained in their hands.'
$839,012.68 had been paid in up to November 15, 1849. In the
year ending November 15, 1852, $279,274.96 was paid in.^ By
comparing the reports of different years it seems probable that a
little more than $1,900,000 had been paid by November 15, 1S55,
or, according to other estimates, about $1,700,000."

During 1856, the amount paid in was about equal to the amount
of the previous year, but immediately afterwards the stream dries
up very fast, not merely from the fact that most had been paid in,
but because the counties did not pay. Twenty-five counties were
delinquent as late as 1862, when a tax was authorized to be
levied to pay these dues. They could be discharged in certificates
of the State funded debt, and the payment credited to the sink-
ing fund.*

The money still failed to come in, and by the act of April,
7, 1869, the deficiency, when collected, was to be applied to any
fund in the counties that the people thought best.^

Now that the history of the surplus as a loan to the counties
has been detailed, it only remains to pick up the thread of its
relation to the school fund, and then briefly to see what was
done with the money. Besides the provisions of the acts pre-
viously quoted the school law of 1838 appropriated the interest of
the surplus to schools," and the act of March 24, 185 1, repeated

^Am. Aim., 1S51, 277. Under this arrangement it happened in cases of
delay that the State paid 7 per cent, on her bonds, while the counties only paid
6 for keeping the money which would pay the bonds. — Auditor's Rep., Acts
1849-50, 16.

* Am. Aim., 1854, 296-7. The almanac during these years gives the annual
returns.

" Perhaps the latter is the safer figure, for in that year the interest on the sur-
plus amounted to $17,280.01, whence it would appear that about $300,000 had
not been paid in. The first figure was calculated from not over-clear returns in
the American Almanac.

* Act of April 23d, 59 Stat., 59 ; 2 Rev. Stat., 18S0, 2103.
* 66 Statutes, 45. 2 Rev. Stat., 1880, 2105.

'Am. Aim., 1S39, 191.

98 SURPLUS REVENUE.

the clause and added to the common-school fund " the balance of
the Surplus Revenue Fund.' This last phrase it has been impos-
sible to interpret exactly, for in the school reports the surplus is
not mentioned, as the common school fund, of which it is a part,
is reported as a unit. It may mean the surplus left after paying
the turnpike bonds and 7 per cent, stock of 1851.

The State borrowed some of the money from the counties ; e.g.,
in 1840, there was such a loan of $63,332.68 from three counties,
while the auditor managed the funds of four more counties."

The use made of the principal is well illustrated by the follow-
ing extract from an auditor's report:

APPROPRIATION OF THE SURPLUS REVENUE.

Appropriated for the redemption of the turn-
pike bonds, S337»369-85

Appropriated for the purchase of State bonds,

7 per cent, stock, ...... 208,312.08

Appropriated for the payment of the faith and
credit bonds, to be refunded from the
sinking fund, . . ... . • 92,742.90

Total repaid by the counties, .... $839,012.68
Amount loaned to the State, .... 16,806.43

Balance due by the counties Nov. 15, 1849, . 1,151,441.23

$2,007,260.34'

The internal improvements of Ohio were far more successful
than those of other States, because her undertakings were more
within her power. In December, 1846, Governor Barry said the
internal improvements were fully completed. They were monu-
ments of early wisdom and public spirit, and had contributed to
the development of the country.* So the application of the sur-
plus to paying part of the improvement debt was a payment for
value received, and not as with so many States merely sinking the

' Am. Aim., 1853, 297. Repeated in succeeding issues.

" 2 Hazard, 102. ^ Laws, 1849-50, 16. "' i Bankers' Mag., 433.

SURPLUS REVENUE. 99

money in redeeming a vast debt with nothing to show for it. Yet,
notwithstanding the favorable words of Governor Barry, the con-
stitution of 1 85 1 prohibited the State from ever contracting debt
for internal improvements and from lending its credit/

Pennsylvania Received $2,867,514.78.

In Pennsylvania, in 1836 as in 1883," there was a party in favor
of distribution. On June 16, 1836, a resolution was passed by the
Assembly deprecating the investment of the surplus in State
stocks, and declaring that the most safe and Federal disposition
which could be made of the surplus revenue would be its appor-
tionment among the several States.'

The deposit was accepted Dec. 22, 1836. So much of the
money as should be paid in draft or drafts on any bank or banks
in Pennsylvania was to remain where it was then, or where it
might be deposited Jan. i, 1837, until further disposition of it by
law."* A temporary measure in reference to the deposit was passed
Feb. 27, 1837.'

The parts in the Girard Bank, the Moyamensing Bank, and the
Merchants' and Manufacturers' Bank of Pittsburg were to stay
there, paying five per cent, interest ; the rest was to go into the
Bank of Pennsylvania and the Bank of Philadelphia, and to pay
six per cent., provided the banks accepted the charge. The

' Am. Aim., 1852, 295.

*One of the resolutions adopted by the Republican State Convention of Penn-
sylvania, July II, 1883, reads as follows : " Any surplus in the public treasury
arising from a redundant revenue should, after paying the national debt as fast
as its conditions permit, be distributed from time to time to the several States
upon the basis of population, to relieve them from the burdens of local taxation
and provide means for the education of their children." — See " The ' Surplus '
Question," a little pamphlet which may be obtained of The American, Phila-
delphia.

' Acts of 1835-6, 853. * Acts of 1836-7 (the third act of the session).

'Gov. Ritner, in his message, recommended that the surplus falling to Penn-
sylvania should be forthwith and immediately applied to the payment of so
much of the State's debt as it would cover. — Boston Traveller in Boston
Recorder, Dec. 23, 1836. By this means a non-interest-bearing debt would in
so far have been substituted for the interest-bearing debt.

lOO SURPLUS REVEMUE.

interest of these moneys as paid by the banks was to be applied to
the fund for common schools.^

A month before the general act, however, the treasurer was
authorized by a resolution to take a sum not exceeding ^150,000
from the surplus revenue to make up the deficiency in the semi-
annual payment of interest on the State debt, due Feb. i, 1837.*

By a special resolution, passed April 7, 1837, $500,000 of the
surplus was appropriated as an increase on the annual grant of
$200,000 " to be applied by the several districts either for buildings,
repairing or purchasing school-houses, or for education, as they may
deem best." This additional appropriation increased the average
school season, which was three months and twelve days in 1836,
to five months and eight days.^

Besides the act and two resolutions that have been described,
Pennsylvania passed no general law^ touching the surplus rev-
enue, but considered the money outwardly in the light of a non-
interest-bearing loan to the State immediately available for any
wants. It is generally said that Pennsylvania used the money for
schools and internal improvements.^ This is true enough, but it
is more accurate to say that most of the surplus, especially that
part not used for education, was just put into the State treasury
and drawn upon for all kinds of uses. This view is derived from

1 Acts, 1836-7, 24. * Acts, 1836-7, 395.

^ School Report, March, 1840 ; 2 Hazard, 226.

* This becomes apparent in the course of the narrative, but the following may
be quoted. " Pennsylvania, by a prudent foresight of her executive, has
escaped from the disappointment, which must be severally felt by her sister
States, having made no disposition of her share." — Quoted with date, May 10,
1837, in I Financial Register, 151.

* " The appropriations for education are very liberal — $500,000 from the
State's share of the surplus revenue, and $200,000 from the bonus given for the
charter of the U. S. Bank. The residue of the surplus revenue is applied to
the continuance of internal improvement, and the payment of the State debt."
— Nezv Yorker, April 15, 1837. The American, of Philadelphia, Dec. 22,
1883, contained a short notice of the surplus in Pennsylvania, and the Fhila-
delphia Press of Dec. 20, or 21, 1883, contains a more extended account taken
from sources independent of those used in the text. The conclusions are that
" it was used for two great objects — public improvements and public schools."

SURFLUS REVENUE. lOI

the treasurer's report for 1837. In it (p. 7) the surplus revenue,
^2,867,514.78, is included among the receipts for 1837, as well as
in the statement of debt (p. 5). Then it is said that " after
deducting several drafts for the use of the State treasury, drawn
during the fiscal year," the balance on deposit in these three banks
was 12,220,135.74 (p. 9); this now is exactly the treasury balance,
for the amount paid in for the year ending Oct. 31, 1837, including
balance on hand the 31st Oct., 1836, was . $6,394,076,00
The payments for the same period were . 4,173,940.26

Leaving a balance of $2,22o,i35.74(p.8).

For some years previous to this time the revenue had not met
the ordinary and extraordinary expenditures ; from 1 830-1 835
large sums were received from premiums on loans for internal im-
provements and bonuses on bank charters, and by these the in-
terest on the public debt and the large local appropriations were
met annually. " From 1835 till the present time (says the report,
p. 12) the deficiency has been met by premiums on bank charters,
and the surplus revenue received from the United States."
These extracts show clearly how the surplus was regarded and
used.

In reference to the use of the interest of the surplus while on
deposit, F. H. Burrowes, Superintendent of Schools reported as
follows : " By the fourth section of the act of the 27th of Febru-
ary, 1857, the interest of the surplus revenue received by this
State, is ' ordered to be applied to the fund for the support of
common schools within this commonwealth.' The sum already
received into the treasury amounts to ^100,000 and will be con-
siderably increased before the principal is expended for internal
improvements or other purposes. This money has not been em-
braced in the estimates of the State Treasurer, Governor, or any
other officer, and has not, therefore, been calculated on for any
other public use." Doubts had been entertained by the treasurer,
and auditor-general whether the Legislature did not mean to have
the interest added to the annual State appropriation ; but the
superintendent thought that the use of the word fimd determined

I02 SURPLUS REVENUE.

that the interest was to be added to the principal of the school
fund.'

The interest on the deposits for the year ending October 31,
1838, was $137,668.86.'

The school system of Pennsylvania was helped by the surplus
revenue to the extent probably of about $800,000. It could not
have drawn the interest more than two or three years, for in 1840
the treasurer of the State called attention to an annual deficit of
$1,000,000 and upwards, in the ordinary receipts and expenditures
of the State.'

The surplus could not stand such a drain long and it had disap-
peared before 1840, as these deficits were made up by new loans.

The aid that the cause of education received from the surplus
was timely and very helpful. A school system had been organized
in 1834, and what was needed most were accommodations and
means to set it in operation. The surplus supplied this need at a
time when it would have been met but slowly by the people. For
at that time they were reluctant to endure taxation, much pre-
ferring running into debt, and a little later they were heavily
weighted with taxes imposed on account of the extravagant im-
provement system. Not many years after this their appropriations
fell too low to make what was given of much service.^

Pennsylvania's experience with internal improvements was a
hard one, and brought the credit of the State under a cloud for
some years. The State was not only deeply involved in debt but
a great deal of money was wasted and thrown away. This is
practically acknowledged by Gov. Porter, who favored the system
in general.^

' 4th Ann. Report, 1837, 21-2. ' 55 Niles, 200. ' 2 Hazard, 91.

*Townsend Haines, Supt. of Pub. Instruction 1848-49, said: "The appro-
priation now made by the State is literally squandered." He mentions several
reasons, among them that the amount was too small to be effectual, and that
the people were dispirited by grievous taxation for the State debt. — l6th Ann.
Report, 1849, 16.

' " On the whole, though some works have been undertaken of doubtful
policy at the time, though large sums of money have been expended on some
which ought never to have been commenced, and though the cost of those of

SURPLUS REVENUE. 103

" The total cost to the State of the Pennsylvania Canal and
branches" between 1826 to 1843 was $28,616,375.01. In 1843
the State owed a net amount of $41,581,281.99. By 1844 the
people had become alarmed at the prospect and declared them-
selves in favor of stopping short and selling the public works. In
1845 the main line of the public works was offered for sale
for $20,000,000, but there was nobody to buy. In 1858 the same
property was sold to the Pennsylvania Railroad Company for
$7,500,000.' These figures show the losses on invested capital.
The introduction of railroads lessened the value of the greatest
undertakings in the State, and this unavoidable circumstance
must be borne in mind in passing judgment on the internal im-
provement experience.

Rhode Island Received $382,335.30.

The Legislature of Rhode Island accepted the surplus, Nov. 4,
1836, and the next day passed a law providing for its deposit
in banks that had complied with the bank laws. These banks
must pay five per cent, interest thereon. The interest was
to be apportioned according to the act of 1828, and devoted to the
support of public schools.^

This appropriation of the interest was repeated in the school law
of 1839, while the State was to add thereto enough to make
$25,000, which should be the annual appropriation to schools.'

The same year the act regulating the investment of the principal
was so amended that whatever deposits were voluntarily given up
by the banks might be loaned to the towns at five per cent, annual
interest. The sum loaned was not to exceed the share that each
town would receive on the ratio of population, and the loan " must
be used for the purposes of education simply." ^ By this the
schools received a double benefit.

unquestioned utility has been far greater than it would be, if the same work
was to be done under all the advantages of our present experience, we have yet
perhaps as much cause to be surprised at our good as at our ill fortune." — Mes-
sage, Jan., 1840 ; 2 Hazard, 42.

' Penn. Finances, 25-7. 'Stockvvell, 51.

'Acts since 1835, 913-4. * Acts since 1837, 1054.

I04 SURPLUS REVENUE.

This act was still further amended by authorizing the com-
missioners to invest such money as was given back by banks in
town and city bonds having not more than five years to run
and paying at least five per cent, annually. The bonds were
to contain a condition that the city must pay them within thirty
days, if the United States should call for the money.'

Jan. 7, 1840, the State borrowed $29,526.49 of the fund to pay
the remainder of the State prison debt.'' In June, 1842, an act
was passed to draw out $50,000 to pay for the insurrection, to be
refunded as soon as may be, with interest at five per cent.' In
Oct. $32,000 more was voted. ^

The cost of the " Dorr war was met by the use of a portion of
the deposit fund." The expense is variously stated.^

The following is from a report of May, 1846 :
Invested in bank and other security . . . $229,567.84
In the hands of the commissioners . . . 48.18

Borrowed by the State, Jan. 7, 1840, to pay

the balance of the State prison debt . . 29,526.49
Borrowed by State, June, 1842, for State purposes 50,000.00

28,192.72
" " . 25,000.00

" " . 10,000.00

Oct., 1842,

((

Jan., 1843,

((

June, 1843,

((

May, 1845,

Total borrowed by the State, $152,719.21.''

$382,335-23

^ Act, June 26, 1841 ; Acts since Sess., Jan., 1840, 2055.

2 $35,000 was voted (letter from Supt. of Ed., T. B. Stockwell).

= Actsofjune, 1842,8. " Actsof Oct., 1842,85; only $28,192.72 were taken.

° In Mr. E. R. Potter's Report to the General Assembly, June 23, 1843, this
sum is stated at $102,949.63 (Am. Aim., 1844, 219), but in 64 Niles, 296, is the
statement : " By a report of the Finance Committee in the middle of 1843, it ap-
pears that the expense to the State Government of suppressing Dorr's insurrec-
tion was $114,949. This was met by the use of a portion of the ' deposit fund.' "
Full reports of the Loan Commissioners up to date may be found in the Acts of
June, 1841, 46, and again in the May Acts of 1843, p. 8.

° Am. Aim., 1847, 228.

7 " This is sometimes spoken of asadebt " of theState.— Am. Aim., 1849, 236.

SURPLUS REVENUE. I05

In June, 1848, the treasurer was authorized by a resolution to
borrow $16,000 of the Bank of North America, "to prevent using
up any more of the surplus revenue, which by former laws had
been specially devoted to schools." '

This policy was not kept up, however, for in Jan., 1849,
$41,526.67 was drawn " to pay a note at bank." ^

Accordingly, in 1852, the account of the surplus stood as
follows :

Loaned to cities and towns on bond . . , $70,402.60

Invested in bank stock ...... 117,638.67

Used by the State for prison and Dorr war . . 194,245.88

Not funded 48.08

$382,335.23
The State owed no debt save what had been borrowed from
the " deposit fund." '

" In 1857, $32,500 of the fund which had been loaned to some
of the towns was paid to the treasurer and put by him into the
general fund, thus making a grand total of $226,793.96, which
was taken out of the deposit fund proper.

"In 1858 Rhode Island received from the U. S. Government
$4,276.03 on account of sales of the public lands. This amount
was added by vote of the General Assembly to the deposit fund
account,* which made the grand amount due from the State
$231,069.99, leaving a balance still invested in loans and stocks
as a fund. In Jan., 1859, the General Assembly voted to trans-
fer this balance of $155,541.27 to the permament school fund.
In i860 the sum of $11,191.80 surplus revenue of the State was
directed to be added to the permanent school fund on account of

' Am. Aim., 1849, 240. The State already owed $25,000 on note to the
bank.

^ $45,000 was voted — (Mr. Stockwell). This money was withdrawn doubt-
less to pay the very note which was given for a loan to save drawing from the
surplus. — Cf. note i.

' Am. Aim., 1853, 244-5.

■* Accordingly the deposit fund is stated as amounting to $386,611.33 in Am.
Aim,, 1859, 247, and in all later reports.

I06 SURPLUS REVENUE.

the amount of the deposit fund due that fund. No transfer of
funds has since been made, so that the State stands ostensibly
as a debtor to the school fund to the amount of $219,878.19." '

The State has not formally paid interest on this loan but as the
State appropriation to schools is far greater than this interest, it is
fair to say that the interest is included in the appropriation. If
the State transferred the interest formally, the appropriation
would doubtless be just so much less. At the same time the in-
lent of the original laws was that the money should constitute a
fund, and if borrowed should be repaid. The State appropriation
was $25,000 in 1839 ; it was raised to $35,000 in 1851, to $50,000
in 1854, to $70,000 in 1868, to $90,000 in 1869, and has just been
raised to $120,000.

The regulation about loaning the surplus to towns has been so
far changed as to direct that the shares of the towns should be
proportioned to the number of children in them under fifteen
years of age. The commissioners of the fund who managed it
are the Governor, the Secretary of State, and the General
Treasurer.''

1 For these particulars I am indebted to the kindness of Mr. Thos. B. Stock-
well, the State Supt. of Public Instruction ; other facts that he sent me
threw light on some obscure points in the account of R. I.

" Revised Statutes, title 3, ch. 14. School Laws, v. As will be seen in the
report above, dated 1852, acts later than that of 1837, allowed the commis-
sioners to invest the money " in good bank stock."

CHAPTER XI.

the surplus in the states.
South Carolina Received $1,051,422.

The Legislature accepted the share of the surplus that fell to
the State, December 21, 1836, and ordained that it be deposited in
the Bank of South Carolina, to the credit of the State, not as a
part of the capital, but " to be banked upon and employed accord-
ing to the usages of said bank." *

The day before, by a resolution, the comptroller-general had
been authorized to subscribe ten thousand shares, or $1,000,000,
to the Louisville, Cincinnati, and Charleston Railroad,'' to be paid
out of the surplus revenue in instalments, as the other stock-
holders paid. By the charter, the $1,000,000 could be called for
by the company in instalments of $5 per share, or $50,000, every
sixty days.^

By the act of December 20, 1837, the fourth instalment was to be
paid to the L., C, and C. Railroad Company to the credit of instal-
ments to become due from the State.*

The ten thousand shares were subscribed for in 1837, and one

' Acts of 1836, 45. Governor Pierce M. Butler, in his message, after this
suggested that a portion of the surplus be used in erecting monuments on the
Revolutionary battle grounds (Acts and Resolutions, 1837, p. 5 of Message).
Another proposal : a South Carolinian, premising that the surplus revenue was
the planters' money refunded by the Government, proposed that the State lend it
on negro security, to save the planters from having to sell their negroes ; to make
the security valid let the banks make the same fund into an insurance fund to
insure negroes (51 Niles, 257).

' On this great railroad bank see the Globe, September 7, 1836 ; January 2d ;
and January 14, 1837; 2 Financial Register, 96, 318, 351. The notices in
Niles are indexed and are therefore omitted here.

' Resolutions, 1836, 129 ; Report of Pres. of Bank, 1843, 33

* Acts, 1837, 1836.

107

I08 SURPLUS REVENUE,

instalment of $50,000 was paid that year. In 1838 another in-
stahnent was paid, which left then 1951,422.09 "on deposit in the
Bank of South Carolina subject to the payment of the remaining
instalments on said shares when called for, and in the meantime
to be used as other deposits." ' By October i, 1839, $50,000
more had been paid.^ The rest may best be told in the words of
" The Report of the Special Joint Committee Appointed to Examine
the Bank of South Carolina " on the sinking fund. " In 1840 the
six-per-cent. stock, issued under the act of 1820, became redeem-
able and, before the ist of October of that year, the sum of $798,-
795.96 was redeemed and debited to this fund [/. e., the sinking
fund], which was thereby reduced to $57,806. It was then, by
the direction of the comptroller-general, credited with the sum of
$651,422.09, part of the surplus revenue received from the Federal
Government, and deposited in the bank.

"By an act passed in 1836, before this money was received, it
was directed that^the instalments, as they should become due on
shares to be subscribed for by the State to the L., C, and C. Rail-
road Company, should be paid out of it, and accordingly the first
four instalments were so paid ; but in 1839 when it was deemed
expedient for the State to make an immediate advance of twelve
instalments, amounting to $600,000, the comptroller-general was
directed to issue and deliver to the railroad company $600,000 of
six-per-cent. stock, instead of requiring that sum to be paid by
the bank, and by the same act the interest on the said stock was
made payable out of the sinking fund ; and the capital and profits
of the bank and the balance of the surplus revenue beyond the
amount required to pay the four instalments of the subscription
to the railroad not advanced, were pledged for the payment of the
interest and principal of said stock. The amount of surplus
revenue then on deposit was $85 1,422.09, of which $200,000 would
be required to pay the four instalments not yet advanced, leaving
the sum of $651,422.09, which was carried to the credit of the

' Report of Comptroller Hayne ; Acts and Res., 1838, 70; and Table G,
Bank Report, ibid.

^ Table F, Bank Report, 20, in Comptroller's Report, 1839.

SURPLUS REVENUE. ^ IO9

sinking fund as above mentioned." ' . . . The fund later " was
credited in 1844 with a balance of $200,000 surplus revenue,
which was, by an act passed in 1843,'^ directed to be transferred
to this fund."' Besides the six-per-cent. stock of 1839, the five-
per-cent. stock of 1826 was to be extinguished by the sinking
fund. The last payment on the five-per-cent. stock was made in
April, 1847, and the last on the six-per-cent. stock in March,
1856.'

While the surplus was deposited in the State bank the profits of
the bank, arising from the interest on the same, amounted by Octo-
ber I, 1843, to $356,221.10.'

In the statements of the public debt of South Carolina the
comptroller mentioned the $1,051,422.09 surplus revenue annually
down to 1859.*

Though the great Louisville, Cincinnati, and Charlestown Rail-
road was never built, the investment of the State seems to have
been a good one. The new company bought the South Carolina
Railroad from Charleston to Hamburg, 135!- miles long, which cost
$1,750,000, for $2,400,000 of L., C, and C. stock.* Besides its
subscription the State guaranteed for the railroad a loan of two
million dollars.' After buying the South Carolina road the L., C,
and C. Co. almost reconstructed it, and laid out the branch road to
Columbia, 128 miles in length, which was opened in November,
1840. The railroad bank had a capital of $1,500,000, on which in

* Reports and Resolutions of 1849, p. 100. In Rep'ts and Res., 1847, p. 36,
is a report of the president and directors of the Bank of South Carolina, and
another is to be found in Rep'ts and Res., 1840, 32. These reports agree
thoroughly with the above, and illustrate the methods of accounting. The sur-
plus was made a special account.

" Dec, 1843.

° Letter from the State Treasurer.

^ Report of Pres. of the Bank, 1843, p. 43.

* Reports /«JJZOT / also Am. Aim., 1853-61, Art., South Carolina. In 1843
Governor Hammond said : " It is highly probable the State will never be called
on to refund the surplus revenue, though her liability for it should never be
forgotten in an estimate of her debt." — Am. Aim., 1845, 252,

° 2 McCulloch, Geo., Diet., 831.
' 55 Niles, 40.

no SURPLUS REVENUE^

ihe first part of 1839 the profits were at the rate of eight per cent,
per annum.' Then, after the big scheme fell through, the different
branches in the State were consolidated in 1844 and called the
South Carolina Railroad Company. This road did a profitable
business up to the time of the war, but has since been unfortunate.'

In November, 1846, Governor Aiken said: "The State has
hitherto exhibited a wise policy in investing the greater part of the
surplus revenue in the South Carolina Railroad." He pronounced
it a valuable enterprise which had thus been encouraged, was then
in successful operation, and which promised to be a source of
wealth.^

The State owned $641,000 of stock in this company as late as
October 1853.'

From the facts at hand it seems on the whole that South Caro-
lina stands very well among those States that invested the

surplus.

Tennessee Received $1,433,757. 58.*

The surplus was accepted October 24, 1836, and directed to be
deposited in the Union and Planters' banks of Tennessee under a
special contract by which they were to pay the State five per cent.

' Hayne's Report, 56 Niles, 325.

" The annual dividends between 1844-58 were 5, 5|, 5^, 5.83, 2\, 4, 6, 7, 7,
8, 8|, 8|, 10, 8, 8^ (Poor's Manual, 1869-70, 262). The expense of rebuilding
and equipping the road after the war loaded it with a large floating debt. It
became embarrassed, failed to pay the interest on its bonds, and was put into
the hands of a receiver, September, 1878. It was sold under foreclosure, July
28, 1881, and reorganized as the "South Carolina R. R. Co.," November i,
1881 (Poor's Manual, 1883, 453).

' I Bankers' Mag., 428.

* 8 Bankers' Mag., 625.

" This was the share that fell to Tennessee, but whenever the amount is men-
tioned it is stated as $1,353,209. The cause of this discrepancy, I have not
been able to find out. In the report of the Secretary of the Treasury presented
at the meeting of the extra session of Congress in 1837, it was stated that about
§1,165,575 of the transfers of the July instalment had not been receipted for or
received by the States. It is barely possible that the missing eighty thousand
dollars falling to Tennessee is to be included in this sum, and that it was not
recovered.

SURPLUS REVENUE. Ill

interest, payable semi-annually. All the interest that accrued was
to be received by the treasurer and charged to him by the comp-
troller as part of the State revenue, subject to the comptroller's
warrants to meet all appropriations chargeable on said fund bylaw.
The residue left was to be loaned to the Union Bank.' The
Farmers' and Merchants' Bank of Memphis would be allowed part
of the surplus revenue if it agreed to the contract, which it did.

$707,353 of the surplus was deposited with the Union Bank,
and " was considered available for capital, as it was not likely to be
suddenly recalled. " "^ The rest was deposited in the Planters' and
Memphis banks under the same condition.

January 19, 1838, was passed "an act to establish a State bank,
to raise a fund for internal improvements, and to aid in the estab-
lishment of a system of education." The main provisions were
that a State bank should be set up with a capital of five million
dollars, made up of the surplus revenue and the unexpended
interest thereon, the school fund, the proceeds of the sales of the
Ocoa (or Ocoee) lands, and of such additional sums to be borrowed
as would be required to complete the five million dollars. The
fourth instalment, if it was received, was to be paid on the stock
in addition to the five million dollars.

The surplus was to be paid over from the deposit banks in two
yearly instalments, beginning Jan. i, 1839, in specie or in funds
immediately convertible into specie, Of the dividends of this
bank $100,000 was annually to be set apart for common schools,
to be applied as the General Assembly might direct. Further,
$18,000 more was annually to be appropriated for county acade-
mies. The bank also was to pay the interest on the internal im-
provement bonds. Under this head $650,000 each was appropri-
ated to the construction of the Hiwassee and the Charleston and
Cincinnati Railroads, to be paid by instalments.^

* Laws of Called Session, 1839, 9. ' See Trotter, 258 and 412.

' Laws, 1837-8, 153-66 ; i Financial Reg., 222 ; Trotter, 261. The Am. Aim.,
1845, 270, gives a history of school legislation up to this law.

The instalments to the L., C, and C. Railroad were to be five per cent.,
fifteen per cent., fifteen per cent., five per cent., and so on of the total sub-
scription. The instalments were to fall due as soon as the stockholders had

112 SURPLUS REVENUE,

Next in the comptroller's report of Oct., 1839, the following
statement is found : " The first instalment of one half the U. S.
revenue deposits in the Union, Planters', and Memphis banks has
been promptly paid by the banks respectively, amounting in all to
^674, 837. 33/ The whole amount of the school fund in the treas-
ury, and liable to distribution on the first Monday of Jan. last,
was only 1115,551.46, and this sum has been disbursed. At the
close of the first bank year the annual dividend required to be
made by the Bank of Tennessee, of $100,000 for the use of com-
mon schools, and of $18,000 for the use of county academies, was
duly set apart by the directors and placed in the treasury. The
common-school portion has been distributed generally to the
counties in their due proportions." ^ This appropriation of $roo,-
000 annually of the profits of the bank might with no great stretch
of the fancy be considered as the appropriation of the interest of
the surplus for education, for $100,000 less the interest on the
school fund, which was invested in the bank,' is about seven per
cent, on the surplus.*

paid in equal amounts. To the Hiwassee road the State was to subscribe as
much as the stockholders paid in, provided it was not more than $650,000.
The Hiwassee road was to go from Calhoun on the Hiwassee to Knoxville.

' In the cashier's report (i Hazard, 361) the sum is stated at $678,373.12, and
put to the credit of the bank as capital stock. This discrepancy is probably ac-
counted for by the method of payment. $150,000 was paid in silver, and the
balance in post notes of the banks payable in Philadelphia at 60, go, and 120
days, adding interest. — Report of Pres. of Bank, Oct., 1839 ; i Hazard, 292.
^ I Hazard, 306.
' July I, 1840, the capital of the bank was made up of :

State bonds $1,000,000.00

School fund 115,528.46

School fund (Ocoee) 587,051.90

Surplus revenue 1,353.209.55

$3. 055-789. 91
Cashier's statement ; 3 Hazard, 121.

* The revenue of the school fund expended from March i, 1836, till Oct. i,
1837, was $17,705.26, which is about $ii,ooo a year. $100,000 less this income
equals $89,000, or nearly seven per cent, on the surplus ; or to present the same
in a different way, Oct. i, 1841, the capital of the bank was made up of the

SURPLUS REVENUE. II3

But whatever views may be accepted on this, point it must be
said that the law, though well intended, was a failure in nearly
every direction.' It is true that education received some help but

Proceeds of the sales of six-pei-cent. State bonds . . . $1,000,000.00
School fund collected, and proceeds of the sale of the Ocoee

lands 769.537.31

U. S. surplus revenue 1,353.209.55

$3,122,746.86
(5 Hazard, 267.) Now the $118,000 appropriated from the net profits on this
capital is almost exactly six per cent, on the whole school fund and surplus
revenue.

' " The benefits expected to be derived from the act of Jan. 19, 1838, have
not been realized. The bank has failed to effect the amelioration in our
pecuniary affairs that its authors anticipated, and the expectations of the public
have been sadly disappointed ; nor has the operation of the act been more salu-
tary and successful in relation to other interests it was intended to foster.
There is, probably, not another law to be found among our statutes that more
signally failed to fulfil the wishes of the Legislature, or one that requires more
thorough reversion and amendment in order that it may effectuate the purposes
for which it was designed." The State by the provisions of the act of Jan. 19,
1838, was to issue bonds in subscription of stock in improvement companies, so
soon as individuals subscribed for the other half and deposited 15 per cent.
of the subscription (Trotter, 262). These State bonds had ruinously depreciated
and great losses threatened those contractors who engaged to receive the bonds
of the State in payment of stock or for labor, unless the Legislature provided
for the emergency. The action of the school system had not been attended
with very satisfactory results. — Gov. Cannon's message, Oct., 1S39 ; l Hazard,
296 ; partly in 57 Niles, 137. Two years later Gov. Jones in his inaugural
message, Oct., 1841, pronounced the improvement laws of 1837 " impolitic,
unsafe, and wholly inadequate to accomplish the objects contemplated." They
were "loose and unguarded, opening the door by which fraud and injustice
might be perpetrated on the State with the greatest facility." Some improve-
ments had been made' in the law, but there was room for more. The State
Constitution provided that the common school moneys belonging to the State,
should be a perpetual fund, the principal never to be diminished by appropria-
tion, the interest to go to education. The present system was very imperfect,
but its influence had been salutary. The law was " vague, indefinite, and com-
plicated," and its revision was demanded by the best interests of the State. — 5
Hazard, 296-7.

To cite a specific case of unsuccessful improvements. The Hiwasse Railroad,
designed to extend from Knoxville to the Western Atlantic R.R., at a point

114 SURPLUS REVENUE.

not so much as ought to have been received, and the provisions of
the law, as a whole, ended in consuming a good deal of the princi-
pal of the school fund, as we shall see. Nor must it be understood
that the surplus was considered as a part of the principal of the
school fund ; on the other hand, it is mentioned during these years
as a resource of the State for paying its debt, in case the United
States did not recall it.'

All of this generous appropriation, however, though regularly
paid by the bank, apparently was not expended for schools. The
following items are found in the financial report of the State for
the year ending in Oct., 1846.

RECEIPTS OF THE STATE.

Bank of Tennessee, for schools . . $100,000
" " " academies . 18,000

)i 18,000.00

EXPENDITURES OF THE STATE.

For common schools .... $65,083.78
" academies 11,931.36

$77,015.14

Leaving a remainder of . . . . . $40,984.86

near the Tennessee line, about 100 miles, was begun in 1826 ; about 70 miles
were graded at a cost of $1,000,000, when the company had to stop on account
of financial difficulties. Strong efforts were made to resume it, but without
success. — Am. Aim., 1849, 290.

The Louisville, Cincinnati, and Charleston Co. had abandoned work as far
as Tenn. was concerned before Oct., 1841 (5 Hazard, 347). And in 1844 the
company surrendered $32,000 of 5 per-cent. -improvement bonds to the State
which were cancelled (67 Niles, 340). The total amount issued for this road
was $560,000.

These bonds could be withdrawn under certain conditions (63 Niles, 119),
and the above is doubtless a case of withdrawal.

Considerably later than this, in 1849, Gov. N. S. Brown called the improve-
ment act of 1837-8 " an indiscriminate policy, that if persevered in would bank-
rupt any state in the world." " The tendency was to construct any and every
sort of road without reference to its importance or value." — 4 Bankers' Mag.,
484-6.

' 1841, 5 Hazard, 274 ; 1843, 64 Niles, 245 ; 1853, Am. Statist. Ann., 1854,289.

SURPLUS REVENUE. II5

of the disposal of which nothing is said.' Judging from the prac-
tice of the neighboring States it probably went into the general
fund.

We now come to the time when the effects of the law of Jan.
19, 1838, had begun to bear down on the bank which it had
created. In T849 Gov. Neil S. Brown ^ called attention to the fact
that the fixed charges on the bank threatened to bankrupt it,
though it had been profitably managed, and to consume the school
fund as well as the surplus revenue. This finally came to pass.
In 1865 Gov. Brownlow declared the bank hopelessly insolvent.

Feb. 16, 1866, an act was passed to wind up and settle the busi-
ness of the bank. After the assignment of the assets the first fund
to be secured was the ^1,500,000 of school fund.*

The conclusion in regard to the surplus is that it was used up
either in providing for the general expenses of the State or in

^ I Bankers' Mag., 365.

' In general he said : The bank was suffering a constant loss of capital. It
had made seven per cent, since its organization, but by State regulation it had
to meet imposed liabilities that would require a profit of ten or eleven per cent.:
e. g., the real capital of the bank did not exceed 2^ million ; seven per cent, of
that was $175,000 per year ; but in 1847 the stated liabilities amounted to
$271,712.87. Here then was a deficit of $96,712.87 to be taken from the capital.
Further, no account was taken of the increased liabilities and current drain of
capital. The bank began July i, 1838, with $3,226,976.82 capital, and by July
I, 1849, $800,000 had been lost, it was believed. At that rate the whole capital
would be gone in sixteen years. [This prophecy was almost exactly fulfilled as
to time. Note the date given in the text.] The bank ought to be either discon-
tinued or disencumbered. Under the existing policy the dissipation of the
capital must result before long. " That capital, as is well known, embraces the
common-school fund and the surplus revenue — if the latter should ever be called
for, it would present us a melancholy alternative, — while there is little probability
that the former would ever be supplied, however solemnly it has been pledged
by the Constitution, and however ardently it has been cherished by the friends of
education." — 4 Bankers' Mag., 4S4-6.

'Acts, 1865, g. He says also that the school fund had " been squandered by
bad men and dishonest functionaries, who fled at the approach of the old flag."
It seems more probable that the fund had suffered with the rest of the bank's
capital, than that this accounts wholly for its loss.

^ Acts, 1865-6, 38. The fund was reorganized in the Constitution of 1870.
Art. xi., § 12.

Il6 SURPLUS REVENUE.

paying interest on bonds issued for internal improvement? which
failed, and that the interest was used in part for the same purpose,
and in part to promote education."

Vermont Received $669,086.79.
Gov. Jennison recommended that the income of the surplus be
applied to the support of normal and primary schools.^ Partially
following the governor's advice, the money was accepted and dis-
posed of in Nov., 1836, as follows: It was divided among the

' There is one reference to the surpkis and the school fund which has been
omitted in the text and reserved for notice here on account of the hitherto in-
explicable confusion of the statements.

Jan. I, 1859, the capital stoclc of the Bank of Tennessee Avas readjusted, " and
the school fund constituting a portion of the capital stock was as follows :
School fund $215,648.35

" " Ocoee

" U. S. public lands
Surplus revenue (one half)
Ledger balance

576,536.81
11,189.80

466,439.59
44,621.18

$1,414,434.73.

Report of John Eaton, Superintendent of Public Instruction, 1869, p. of
Appendix 103.

If we are to understand by this that of the whole surplus only twice $466,-
439.59 was left, and that that sum had been credited to the school fund, the only
difficulty then is to account for the missing part of the surplus ; but if we look
into the Index to the scliool laws which were compiled and published with the
acts of 1853-4 (page 61 of the Index), we find among the sources of the school
funds "one half of surplus revenue from U. S.," and reference is made to the
3d Sect, of the act of Feb. 3, 1842 (Acts, 1841-2, 209) ; but by this act one
half of what Tennessee received from the distribution of the proceeds of public
land sales was deposited in the Bank of Tennessee as a part of the common
school fund. Acts, 1S42-3, 210. This however creates the difficulty, for Ten-
nessee received no such sum as $932,879.18 from the land sales. Her share in
the $562,144.18 to be distributed from the proceeds of land sales from Jan. 1st
to June 30, 1842, was $26,446.68. Up to December 10, 1842, the news had come
that one or two States had received their shares, while others had resolved
not to receive theirs. Among the refusing States were South Carolina and Vir-
ginia. The land receipts from July ist to the passage of the tariff bill, when
the distribution ceased, had not been published then, but probably would not
exceed $184,000. — 63 Niles, 226. Some one of the above authorities has
evidently made a mistake. It is possible that the phrase "one half" ought to
go with " U. S. public lands," and then every thing would be clear, except the
fate of the missing part of the surplus of 1837. '51 Niles,i6o.

SUJiPLUS REVENUE. II7

towns on the basis of population, and was to be loaned on sufficient
security at six per cent, interest. For this purpose three trustees
were to be elected in each town. After every census the money
must be newly apportioned. The interest the towns were to apply
to the support of schools, or if they had other funds sufficient
to support schools in their several school districts for six months in
each year they could apply the interest to any object they might
choose. Among the districts the " income was to be divided
in the same manner as that raised by the three-per-cent assessment
on the grand list." If the towns did not draw the principal they
might draw the interest from the treasurer of the State who was
to put their shares to use. The towns were accountable to the
State when the State Treasurer should require, on requisition from
the United States, or for the purposes of new division.

In cases of breaches of this act the Grand Jurors were to present
indictments against each town so charged, and if the town should
be convicted it must pay a fine not exceeding double the annual in-
terest of its deposit and costs, which fine and costs were to be for
the use of the county.'

The general tenor of this law has never been changed. An in-
vestigation instituted this year shows " that most of the towns
apply the income of the surplus revenue fund of 1837 to the sup-
port of schools. The several towns have invested and keep
the income separate for school purposes, or have conveyed it into
the treasury, and annually raise a sum by tax equal to the interest
of the same, for the support of common schools. A few towns may
fail to do this, but most do it."^

Vermont once had another school fund of about ^200,000
but the State borrowed it and then abolished it instead of paying
the debt.^ The deposit is now called a " school fund." The State

>Z. Thompson, " Hist, of Vermont," part 2, 142 ; Acts of 1836, 11 ; Rev.
Statutes of 1839, 119 ; Compiled Statutes, 1850, 155 ; General Statutes, 1862,
163 ; Revised Laws, 1880, 184.

^ Letter from the State Supt. of Ed. In 1843 about half the interest was so
applied. — Am. Al., 1S45, 208.

' Am. Aim., 1846, 208, and 1847, 221. In 1851 the office of State Superin-
tendent was abolished and no school returns made for some time. — Am. Aim.,
1S55, 22S.

Il8 SURPLUS REVENUE.

has borrowed the shares of some towns, and such loans of from
one to fifteen thousand or more dollars have existed from the begin-
ning. Probably in most cases these loa'ns were merely instances
where the towns did not draw the money which was invested
by the State. '

It will be noticed that Vermont and Connecticut made almost
the same use of the surplus revenue; the similarity is closer than
exists between any two States that have kept part of the money to
the present day.

Virginia Received $2,198,427.99.

The surplus was accepted as a deposit by the act of December
20, 1836, in which pains was taken to declare that it was unjust
to raise revenue for distribution.'^

On the 20th of March, 1837, an act was passed increasing the
banking capital of the State ; by this act the State was to subscribe
for half the increased stock from the surplus revenue. According
to this provision, the State was to subscribe for

$325,000 worth of stock in the Bank of Virginia, and for
505,000 " " in the Farmers' Bank of Virginia.

$830,000
This sum was to be paid from the instalments already received.
Further, from the instalments of July and October (any deficiency
was to be supplied from the first two deposits) the following
amounts of stock were to be bought :

$370,000 in the Bank of the Valley of Virginia.
250,000 in the Northwestern Bank of Virginia, at Wheeling,
150,000 in the Merchants' and Mechanics' Bank, at Wheeling.
900,000 in the Exchange Bank of Virginia.

$1,670,000
The residue was to be loaned as the executive of the Bank of

1 Am. hXxa.., passim. " The State owes several towns, for the U. S. surplus
fund deposited and left on interest, $14,528.94, which is all loaned out agree-
ably to law on good securities." — i Bankers' Mag., 372 (1846).

"Acts, 1836-7, 7 ; 51 Niles, 274.

S URPL US RE VENUE. 1 1 9

Virginia saw fit,' or it was to be loaned to the Bank of Virginia
and to the Farmers' Bank of Virginia at five per cent, yearly, with
the right reserved to convert this loan into stock." With the
fourth instalment this residue would be about $300,000.

Four days later, it was enacted that "so much of the profits or
principal of the surplus fund on deposit in the treasury of this
commonwealth, as shall be requisite to supply any deficiency in
the receipts of the present fiscal year, shall be subject to the war-
rants of the auditor of public accounts to defray the legal and
necessary expenses of the commonwealth." "

June 24th an act for the temporary relief of the banks sus-
pended so much of the act of March 25th as touched the Bank of
Virginia, the Farmers' Bank of Virginia, and the Bank of the Val-
ley of Virginia till March i, 1838. This act relieved them from
increasing their capital, allowed them to suspend specie payments,
and empowered the treasurer to loan out, at good security, at
not less than five per cent, per annum, the surplus revenue that
was to be subscribed to these banks. Further, these banks could
borrow without security as much as was to be subscribed to the
stock.*

At the same time the treasurer was authorized to detain out of
the surplus revenue enough to discharge all claims on the treasury,
which should be duly audited, whether government expenses or
interest on improvement loans. So much as should be paid
upon loans was to be put to the credit of the board of public
works.'

The relief to the banks was extended on Feb., 20, 1838, till
March, 20th, twenty days, and the time to increase the capital
was extended till April first. As the 20th of March approached
the limit of the relief was placed at the end of the session.^

' P. 72, of Acts, 1836-7. General ref., ibid., 68-74. These two statements
are not alternatives in the text, but such seems to be the sense of the law.
' P, 73, of Acts, 1836-7.

* Acts, 1836-7, 6 ; 52 Niles, 273.

* Acts of Extra Sess., June, 1837, 4.

* Acts of Extra Session, June 1837, 7, ^d 5,2 jfcifiks, 273.

» Acts of 1838, 77. Wcstrr.imter Oda reilows

Free Librai^ and Reading R0dm,.7

I20 , SURPLUS REVENUE.

One case of a loan of the surplus can be mentioned. In 1837
the executive loaned $98,065.83 to the Richmond and Petersburg
Railroad Co. The company failing to pay the interest repaid the
loan in part by returning a draft for $100,000 gn the Board of
Public Works which had been granted to the railroad. There was
left then a deficit of $11,993.^

Either at this time or later $225,792.93 " surplus revenue " ap-
pears to have been added to the literary fund." During the war
the income of this fund was ordered to be applied to the military
defence of the State. $216,000 was actually paid to the State
under this ordinance, and the rest was realized by the State by
not paying interest on its own obligations in the hands of the
fund. No aid for schools to speak of has since been derived from
the fund.'

With this meagre statement the account of the surplus in Vir-
ginia, so far based upon direct statements must end,^ but there
are grounds for probable conjecture. It seems likely that some
of the bank stock was turned over to the internal improvement
fund later, for among the chief sources of State income in 1855
we find the "surplus revenue internal improvement fund"
$162,591,' and in 1857 the same item was $130,000." No further
explanation was found, and this may not refer to the U. S. surplus
of 1837.

> 59 Niles, 232.

^ School Report, 1871, 198. It is not stated whether this surplus was the
U. S. surplus, and it may have been rash to make that assumption in the text.

' In 1871 it was stated : " No payments or receipts of any description have
been made since the war on account of the literary fund, nor has any interest
accrued to the State been funded." — Ibid., 200. An inspection of later reports
shows that very little is now received from the fund, which nominally amounts
to $1,877,364.68.

^ The treasurer of the State writes that the House Documents of the present
Congress (1S83-4) are to contain full information on the use of the surplus.
Unfortunately this document is inaccessible at the present writing. The state-
ment was probably made in connection with Virginia's application for the
fourth instalment.— See page 43.

' Am. Aim., 1857, 283.

° Am. Aim., 1859, 280.

SURPLUS REVENUE. 121

About this time the State owned stock in improvement com-
panies to the amount of $18,359,226, and held bonds and certifi-
cates of loans besides, which raised the amount to about
$24,000,000 par value. The real value was unknown and the
property was much depreciated.' The following testimony is of
considerable value : " The portion [of the State debts for capital
borrowed] put to banking was totally lost, and what was expended
in roads and canals nearly so, for most of them lie unfinished, or
lead to points where such works are not wanted, or would not pay
the interest on their construction."^ These are the words of a
man who represented Virginia in Congress from 1816 to 1840, and
who favored distribution in 1836.^ If the surplus had been used
differently than the borrowed capital in Virginia, or if Virginia
was a marked exception among the States in this regard, it seems
altogether probable that Mr. Mercer would have qualified this
statement. As it stands it leads one to suspect that his views
were formed to a certain extent on what he saw in Virginia.

Before leaving the special subject of the surplus in the States,
it is best to say a word in reference to the character of the forego-
ing pages. The facts were gathered from very many sources and,
in general, were unattended by any critical remarks. Oftentimes
the only available source of information has been the statute-
book, which tells what it was proposed to do rather than what was
done, for many fine-sounding laws were inactive. On account of
this peculiarity in respect to the sources of knowledge, it is very
highly probable that a much more favorable light has been cast
upon the whole operation than would be shed were critical in-
formation attainable.

Contemporary references, though few, generally present a
blacker picture than is drawn in the investigation. Horace
Greeley, as early as October 7, 1837, wrote : '' Two thirds of the

•Am. Aim., 1858, 286.

" Exposition, etc., by Charles Fenton Mercer, p. 157. See also other ex-
tracts, pp. 132 and 222, quoted on pp. 124 of this work.

^ I Benton, 707. Mr. Mercer tried to have the States released from their
obligations to return the money.

122

SURPLUS REVENUE.

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States have mismanaged and misapplied this great fund in such a
miserable, time-serving, popularity-hunting fashion, that," etc/

Charles Fenton Mercer, an advocate of distribution, said,
later, that the surplus deposited " was used up, generally speaking,
in some visionary project, or it was distributed in some way to
the emolument of party and wasted by demagogues." ^ And
again : the States wasted it as they had done millions before
— or what was infinitely worse, the dominant politicians got hold
of it and under pretence of supporting schools or doing some work
for the State, they and their abettors used it up." ' Benton's
severe comments are well known and need not be quoted in detail.''
In brief, he finds no good effects of the bill and various hurtful
consequences, such as corruption, extravagance, and useless waste
of money. But these general effects will be considered more par-
ticularly in the following chapter.

' The New Yorker, March 24, 1837. The N. Y. yoiirnal of Commerce pro-
nounced " the surplus a curse and distribution a greater curse."

^ Exposition, etc., 132. It is only fair to say that Mercer appears as an ex-
treme pessimist in this book.

' Ibid., 121.

* 2 Benton, 39.

CHAPTER XII.

SOME GENERAL EFFECTS OF THE ACCUMULATION AND DISTRIBU-
TION OF THE SURPLUS, ESPECIALLY UPON THE INTERNAL
IMPROVEMENT SYSTEM.

CONCLUDING REMARKS.

The origin and growth of the surplus, the legislation and feel-
ing concerning it, and the various uses to which it was applied by
the States, have all been described, and now it only remains to
call attention to the relations between the surplus and the internal
improvement craze, and to note some of the effects of the distribu-
tion. In general, the growth of the surplus was followed by a
considerable increase in Government expenses,' legitimate and

^ " One, and not the least, of the evils resulting from a surphis revenue is an
extraordinary increase of our Federal expenses." A part of the general increase
was attributed to the Indian wars, and then the report continues : " Unless
prompt measures are taken to reduce our revenue, we may anticipate a rapid
increase of our expenses, and the recurrence of another surplus for deposit or
distribution." — Report of the Com. of Ways and Means. 51 Niles, 326 (Jan.
21, 1837).

The average annual expenditure, exclusive of the public debt, for the twelve
years preceding 1836 was $15,063,000. The expenditure for 1836 was $30,-
868,164, and for 1837 $39,164,745.

" The above sums include payments for trust funds and indemnities, which
in 1837 were $5,610,404.36." — 54 Niles, 320.

Mr. Duncan, of Ohio (July 7, 1838), a Jackson man, in reply to Mr. Bond,
who had upbraided the Jackson men for extravagance, mentions three instances
of inexcusable extravagance that were supported by the opposition : ist. $1,500,-
000 for a canal through the suburbs of Washington. He had looked out on
that canal seven months and had not seen a boat on it. " Unpardonable
folly." 2d. An appropriation for a turnpike road, made at great expense on
the bank of the Ohio and Chesapeake Canal. 3d. A turnpike parallel with this :
the existence of the one superseded the necessity of the other. He had ridden
six or seven times on these roads for exercise, and had seen only one shackly

135

126 SURPLUS REVENUE.

illegitimate, and an astonishing prevalence of official recklessness
and dishonesty in the Government finances, not to say of gigantic
frauds and barefaced plundering of the Treasury,'

Such results, however, are to be expected when a surplus exists,
and in some respects are so well illustrated at the present day, as
not to need any extended discussion.

But when the effect of the surplus in the States is to be esti-
mated, another feature of the times, the widespread enthusiasm
for internal improvements, demands attention, and, indeed, the
two subjects are wellnigh inseparable.

The desire for internal improvements was early manifested
in this country. The lack of convenient means of communication
was a great hindrance to the development of the newly settled re-
gions, and in a general system of improvements all classes saw
great advantages : the land-owner saw his land rapidly rising in
value, the farmer saw new and valuable markets opened to him,
and the laborer saw brisk work and high wages.

Though in Congress the system met with continued opposition
from the strict constructionists on constitutional grounds, the
spirit of improvement grew steadily among the people, until by
the invention of the railroad, it received a great impulse which
fairly turned people's heads. The contagion spread and attacked
the old and new communities alike. It will not lead me too far a
field to present, in the text and notes, some materials which are
not only interesting at the present day, but indispensable in
forming an idea of the system. For this purpose a glance at the
movement in Illinois will be perhaps sufficient. One who lived
through the period writes: "In 1836 the fever of internal im-
provements raged throughout most of the States of the Union.

team on one, and never a living animal except his own horse on the other.
" Extravagant," worthless," "wicked." But the most profligate and extravagant
appropriation was for the Georgetown and Alexandria Canal and Aqueduct. The
canal was underway, was right " on the bank of the Potomac — a canal, deep,
still, and wide, being tide water." — 54 Niles, 375. See Bolles, " Financial
History of the U. S." (17S9-1860), pp. 554-566, for other notable instances of
extravagance, and also 3 Calhoun, 498-499.
' See Bolles, ibid.

SURPLUS REVENUE. 1 27

Pennsylvania, my native State, was crazy to improve the whole
country, whether the wants of the people required it or not. In-
diana was almost as wild ; and Illinois, also, was ^ras^^ considera-
bly with the mania." The movement had begun in Illinois in
1832, and had rolled on with increasing momentum till 1836, when
the law (/. e.^ the improvement bill) was passed. It was not the
fault of the politicians but of the people who clamored for it ; ^ the
people would not trust their representatives, but sent on delegates
to lobby. The bill of 1836-7 authorized a loan of ^8,000,000 for
building 1,300 miles of railroad, and improving five rivers.
$200,000 was to be distributed throughout the counties which
received no improvements.^

The fever raged at the next Legislature, and $800,000 more was
borrowed. " The people were perfectly insane on the subject,"
and beyond the reach of argument ; the banks then failed, money
could not be obtained, and a called session of 1838-9 had to re-
peal the acts, and provide for winding up the business.' The law
had provided that the work should begin on all improvements at
the same time, and so nothing had been completed except the rail-

' Another writer, William S. Wait, in a letter to BickneWs i?^'/or/^r disagrees -^of <^
with the above statement. " Our population is thinly scattered over a large " ^' '

territor}' ; strangers, not only to the country, but to each other, and but little
acquainted with the men who compose the legislative body, and with the motives,
other than those which should promote the general welfare {sic) that actuate
them." — 61 Niles, 244 (Dec, 1841).

^ " The manner in which th-is young State has thus involved itself is made
evident by this single paragraph from the governor's message : ' I am aware
that the system is the result of mutual concession and compromise, and that its
advantages were to be dispensed as equally as possible throughout the State,
by the construction of improvements in almost every county, and appropriating
to those in which no improvements were to be made $200,000 in lieu thereof.'
This is the most comprehensive system of log-rolling, softly referred to by the
governor as 'mutual concession and compromise,' that we have any record of,"
—57 Niles, 356 (Jan., 1840).

* " The Illinois improvement system still continues to create a great excite-
ment in Illinois. At a meeting lately held in Peoria, strong resolutions were
adopted recommending its ' total abandonment,' notwithstanding the admission
that such a step would involve a sacrifice of $4,000,000." — 56 Niles, 36S (Aug.,
1839).

128 SURPLUS REVENUE.

road from Springfield to the Illinois River.' This road was of no
advantage to the State, and was ordered to be sold for what it
would bring. Though it cost the State over ^1,000,000, it sold
for only $100,000 in State indebtedness. The population, though
poor and embarrassed with private debts, was left with a State
debt of $14,237,348.^ The following extract describes the con-
dition of affairs in five of the improvement States : " There are
constructing in the five Western States of Ohio, Kentucky, In-
diana, Illinois, and Michigan :

" Of canals, about .... 1,250 miles

" Of slackwater navigation . . . 750 ''

' " A correspondent of the St. Louis Argus gives the following brief account
of the condition in which things will be left by the Legislature : Out of
300 miles of railroad some 20 are completed, the rest in every stage between
completion and commencement — embankments half formed, bridges half built,
an immense amount of timber lying on the ground ; the first is left to wash
away, the second to tumble down and decay, the last to rot in utter uselessness.
unless some kind persons will take it for firewood or fences. A large amount
of contracts are now abandoned by the State." — 57 Niles, 402.

" The condition of Illinois is truly deplorable. We first see her immense in-
ternal improvement fund squandered by profligate Legislatures as commissioners,
so that after an investment of over $10,000,000 for public works, scarcely a mile
of her canals and railroads has yet been completed so as to afford an income to
the State." (The second disaster was trouble with the State bonds.) — 61 Niles,
247.

"Abridged from Reynolds' "My Own Times," 324-5. In 1841 the debt
was estimated at $17,500,000 to $19,125,000. In 1840 the population of the
State was 476,183, and of Chicago, 4,470 (in 1880, 503,185). — Am. Aim., 1842,
252. In Gov. Carlin's Message of Dec, 1842, the proposed methods of paying
for the improvements are explained. In brief : Six-per-cent. State bonds were
issued to be reimbursable after a long term of years ; the interest on these was
to be paid by negotiating them in foreign markets and realizing the difference
of exchange, by depositing the money thus raised with banks until it should be
disbursed, and by receiving premiums upon it. Further, bank stock was to be
subscribed for, " the dividends upon which, it was expected, would greatly ex-
ceed the interest upon tbe bonds with which the stock was purchased." " Thus
it was contemplated by the advocates of this policy to complete those extensive
improvements without any expense to the State during the process." When
finished the tolls would pay the interest and principal of the cost. — 63 Niles,
297.

SURPLUS REVENUE.

129

" Of railroads

" Of McAdam roads

" Total .

1,540 miles
1,400 "

4,940 miles,

making, in the general aggregate of work to which the States are
parties, about 5,000 miles of artificial communications. Of labor-
ers directly employed on the works there are supposed to be at the
lowest estimate not less than 20,000 during the greatest portion of
the year. If to these we add the numerous body of public officers,
engineers, contractors, agents, store-keepers, and the ordinary pro-
portion of families, we shall find a population of not less than one
hundred and fifty thousand who are dependent upon the public
works of the Western States. The expenditures now annually
amount to between four and five million of dollars, and the sum
total of money solemnly pledged by legislative enactments to the
completion of these works, with what has already been expended
on them, is at least the enormous sum of forty-eight millions of
dollars. To this sum we may add at least $5,000,000 pledged on
the part of individuals, and large sums for the completion of the
national road. Of this aggregate about $10,000,000 have already
been expended, and it is within bounds to say that an amount
fully equal to the sum total will be expended on these and similar
undertakings within the next eight years." '

How far short this was to come of the real facts appears from
the following list of the debts of the " Delinquent States," or States
that failed to pay the interest on their loans. The list is dated less
than six years after the above was written.

Pennsylvania
Maryland

Mississippi
Louisiana
Arkansas
Illinois .

DEBT.

$40,835,013
11,387,285

7,000,000
20,558,000

3,000,000
11,454,170

' 56 Niles, 262 (June, 1839).

130 SURPLUS REVENUE.

DEBT.

Indiana '...... $13,349,500

Michigan 4,077,178"

Of course it would not be safe to assume that the whole amount
of these several debts had been expended in internal improve-
ments, but certainly by far the greater part of them had. As has
been seen this great burden of debt brought on the whole no
adequate recompense for the trouble and the disgrace of bank-
ruptcy. Had the money been well spent and carefully husbanded '
the result would have been different in degree but probably not
in character. The work was undertaken in a heedless, imprudent
way, and the conditions were unfavorable to a successful issue.
When all the circumstances are considered — the log-rolling, the

^ The case of Indiana deserves a special note. "In the fall of 1839, the
purchasers of the State bonds having failed to pay, and the credit of the State
being no longer available, the whole system of operations was paralyzed. On
the 1st of November the total expenditures amounted to about seven millions,
and it was then estimated that the total cost of the works, if completed, would
be about twenty-three millions. Such was the undertaking of a State whose
whole taxable property, at the time the system bill passed, did not exceed,
according to the actual returns, more than forty-seven millions, and such was
the result. The policy of constructing the works and parts of works simul-
taneously was so well pursued, that no considerable portion of any work was
completed or fit for use. Twenty miles of the Madison Railroad, thirty miles
of the White Water Canal, were the principal routes of travel that had been
made ready ; the system lay in fragments throughout a State whose vast territory
of woodland, was, as yet, but slightly interspersed with patches of cultivation.
There lies the system still — its unfinished excavations and embankments, locks,
culverts, aqueducts, and bridges hastening to ruin ; the income insufficient to
pay the expenses of superintendence and repair. The Wabash and Erie Canal
may be ready for navigation next fall, but conceding as much revenue to the
work as was derived from similar portions of the Ohio Canal, it will not yield
in five years more than expenses and repairs," — The Louisville yournal, 61
Niles, 229 (Dec, 1841).

'67 Niles, 371 (Feb., 1845). Florida had to be added to this list two or
three years later. — 73 Niles, 218.

^ " As an actual fact it will be seen that in two thirds of the cases the State
funds have not been judiciously or carefully used, and that the consequence has
been a loss of the money furnished and no corresponding benefit, by reason of
the development of material resources," — Hunt, 134.

SURPLUS REVENUE. I3I

requirement that all works should begin simultaneously, the fatuous
hopes that in some way or other the improvements would cost the
State nothing and would pay for themselves, and the reckless
action of all parties concerned, — it seems right to say that the spirit
was a spirit of gambling.

There was the same kind of excitement, and, with a few ex-
ceptions, equally disastrous consequences followed.

Apart from these considerations there is another reason for the
misfortunes of the AVestern States. The chief lack of new communi-
ties is always capital, but the chief requisite for the prosecution
of internal improvements, is abundant and cheap capital. This
fact at once accounts for the enviable success of Holland in mak-
ing internal improvements, and for the pitiable failure of the
frontier States fifty years ago. Holland is old, well-peopled, and
rich, while the Western States were barely out of their primitive
condition ; in Holland surplus capital and surplus labor are em-
ployed, in the West recourse was had to borrowed capital and
laborers taken from the needful cultivation of the soil. Illinois
in 1837, with about three fifths the present population of the single
province of North Holland, possessed a territory over fifty times
as great. In other words, the ratio of the density of population
was as eighty to one, in favor of North Holland. It is remarked
that of the less than half a million inhabitants of Illinois in 1840,
probably less than 70,000 were taxpayers.

" The mass of the people," said an observer at the time, " live
in the first rude log-house which was thrown up to protect them
from the weather." ' All their capital had been laid out in land,'
and the population was sparse. With a trading capital estimated
at $2,500,000 ' (that of New York was about |roo,ooo,ooo), the
people of Illinois expended on internal improvements between
$10,000,000 and $15,000,000 in a few years. Under these circum-
stances it is easy to see that the results which followed the transfer
of laborers from productive to unproductive employment, and of
borrowing capital to do so, were inevitable ; the candle was burn-
ing at both ends, and each moment the flame burned more fiercely.

' W. S, Wait in BickneWs Reporter, Oct 30, 1841 ; 61 Niles, 243.

132 SURPLUS REVENUE.

The rapid growth of the surplus gave foreign investors great con-
fidence ; the States wanted to borrow for internal improvements ;
to carry on these works men were drawn from the life-support-
ing industries ; this led to an increase in the imports and there-
fore of the surplus, this to greater confidence and easier
loans, this to more undertakings and more subtractions of labor
from the productive employment, and so it went on till the crash
came.

The key to the situation is easy to seize.

There was a large fixation of capital, when the country needed
a large production of capital and that it was borrowed capital,
which was transformed into fixed capital, or more truly, sunk, just
hastened the ruin so much more.

Simultaneously with the sudden expansion of the internal im-
provement movement came the distribution of the surplus to
aggravate the evil. Despite the facility with which the States
could borrow money in the earlier part of the excitement, the re-
ceipt of a large amount of capital, which they believed would not
be recalled, undoubtedly impelled them to greater undertakings,
and added fuel to a flame already burning too fiercely.

That this influence of the distribution was in most cases ex-
tremely hurtful can hardly be questioned. The States were at-
tempting, or in the mood to attempt, far too much, and the distribu-
tion, by enticing them on with aid for the present, and with hopes of
more in the future,' not merely increased the scale of the works
but also, by so doing, greatly enhanced their cost. Since every
additional laborer taken from agriculture raised the price of pro-
visions, and every additional demand for labor raised wages, it
was inevitable that every new undertaking was more expensive
than the last, and, furthermore, increased the cost of all other un-

' Sec. Woodbury, in his Treasury Report in 1839, notes the greatly increased
foreign liabilities of the States, and the large excess of exports over imports
needed to settle these liabilities, and says that the rapid development of this
state of affairs was " accelerated by the distribution of the surplus in deposit
among the States, tempting them in several instances to new and unprofitable
enterprises, and stimulating delusive hopes of still further distributions." — 57
Niles, 294.

SURPLUS REVENUE. I 33

finished improvements/ In Pennsylvania the receipt of the sur-
plus was followed by the passing of a bill appropriating $3,000,000
to internal improvements. Gov. Ritner, in vetoing this bill, asserted
that "the bare probability of the passage of the bill had already
unsettled the condition of whole sections of the State, and had
given a new stimulus to the over-excited spirit of speculation.""
This bill was regarded by some as a distribution of the surplus,'
for no special disposition had been made of the money.

As most of the capital for improvements was borrowed, the in-
creasing cost of the work failed to make itself felt as a brake.
When the surplus came, practically a gift, the case was aggravated
in its worst features, and prudence and economy forgotten.*

Five years after the distribution, Governor Thomas reviewed
the effects of that measure in the following language : " Nothing
has influenced more fatally the evil councils, by which so many of
the States have become involved, than the delusive expectations,
rekindled constantly as fast as they are quenched, of pecuniary
largesses from the national treasury for State purposes. The dis-
tribution law (miscalled the deposit act), which beggared the Gen-
eral Government, whilst but few of the recipients of its bounties
have been enriched, caused a most unfortunate revolution in pub-
lic feeling, if not in public opinion. The possession of that fund,
stimulating as it did the wildest speculations, destroyed at once all
those salutary restraints found in the habits of the people and the
conditions and powers of their local governments. An inexhausti-
ble fountain of wealth, it was believed, had been opened, which
was to flow in perennial streams into the State treasuries. State

' " In consequence of the rise in the price of labor and provisions within the
last two years, and of the amount of work commenced in the other States, the
expense of constructing public improvements has increased fully 50 per cent."
— Gov. Ritner in his veto of the above-mentioned bill (April 3, 1837) ; 52 Niles,
105. ^ Ibid. ^ Ibid., lot.

^ " The moment the States yield to this tempting influence, their indepen-
dence and sovereignty will be at an end. The privilege of expending the reve-
nue, without any of the responsibilities which its collection imposes, will destroy
every principle of moderation and economy." — Governor Carlin, of Illinois, in
discussing the distribution of 1842 ; 63 Niles, 300.

134 SURPLUS REVENUE.

legislators, it was thought, were no longer to be limited in their
operations, or abridged in their expenditures, by the amount of
revenue they might be emboldened to take directly by taxes from
the pockets of the people. A new source of supply was to
was to come through the breach made in the Federal Constitution.
Private property was to be obtained for public purposes, by a less
perceptible, because more circuitous, route. High tariffs were to
be levied to supply not only the demands of the national treasury
but, in conjunction with the land sales, to furnish a surplus for
distribution after that deposited was exhausted. Under the in-
fluence of these and similar delusions, the large and oppressive
debt of Maryland has been contracted." *

With these words of Governor Thomas may be left the brief
consideration of the effects of the distribution. As a discussion
of the economic arguments for and against distributing the surplus
revenue falls outside the range of this work, which is intended
merely as an historical investigation, I have only to present a word
or two in reference to the proper relation of the law of June 23,
1836, to the present schemes of distribution, and my work will be
done.

The act of 1836 was designed to relieve the overburdened Treas-
ury when the public money, as it was then deposited, was doing a
vast deal of mischief ; an immediate remedy was sought for a finan-
cial plethora ; at the present day, however, there is no such press-
ing necessity, and the sole aim of the distributionists is to per-
petuate a high protective tariff. Whether the design be laudable
or not, that is unquestionably the fact.

There is, then, difference enough in the underlying causes to
decrease the value of the precedent which, it is claimed, the act
of 1836 offers to the later projects, but when the legal character of
that act is compared with the propositions that have been lately
advanced, the assumption that the former is a precedent for the
latter is wholly unwarranted. In its legal character the law of
June 23, 1836, was simply a bill regulating the Government de-

^ Message of Governor Thomas, of Maryland, December 27, 1842. — 63 Niles,
315-

SURPLUS REVENUE. I 35

posits. The wideness of the gulf between the modern plans and
their supposed precedent appears in a striking light when we see
the two strongest supporters of the deposit bill emphatically de-
nouncing the collection of taxes for distribution.

Daniel Webster in his speech of May 31, 1836, " On the distri-
bution of the surplus revenue," while favoring a distribution in
that crisis, said : " There would be insuperable objections, in
my opinion, to a settled practice of distributing revenue among
the States. It would be a strange operation of things, and its
effects on our system of government might well be feared. I can-
not reconcile myself to the spectacle of the States receiving their
revenues, their means even of supporting their own government,
from the Treasury of the United States." Further on, Mr. Web-
ster approved of the continued distribution of the proceeds of the
public-land sales, if a separate account were kept of them ; " but,"
he continues, " if we cannot separate the proceeds of the lands from
other revenue, if all must go into the treasury together, and there
remain together, then I have no hesitation in declaring now that the
income from customs must be reduced. It must be reduced even at
the hazard of injury to some branches of manufacturing industry ;
because this, in my opinion, would be a less evil than that
extraordinary and dangerous state of things in which the United
States should be found laying and collecting taxes for the purpose
of distributing them." *

A few years later Henry Clay, when discussing the constitutional
power of the Government to tax, declared : " There is, then, I re-
peat, no power or authority in the General Government to lay
and collect taxes in order to distribute the proceeds among the
States. Such a financial project, if any administration were
mad enough to adopt it, would be a flagrant usurpation.""

With these two opinions, coming from the highest sources,
"sharply implying the wide and essential difference between the
" distribution in 1837 " and the late propositions, the history
of that incident may fitly close.

' 7 Webster, 257.

' 6 Clay's Works, 233.

APPENDICES.

APPENDIX I.

A supplement to " Examiner's" views, mentioned on page i6. The attempt
is simply to calculate what would have been the excess of receipts over ex-
penditures of the Government if there had been no fever of speculation.

ANNUAL RECEIPTS FROM LAND SALES.

Average for ten years before 1835 ..... $2,363,004

after 1S36 3,171,167

2)5.534.171
Average for twenty years excluding the speculative period . $2,767,085

The sales of 1835 amounted to $14,757,600.75

2,767,085.00

By subtracting the average yearly receipts we find the specu-
lative excess for 1835 $11,990,515.75

The sales of 1836 amounted to . . . . . . $24,877,179.86

2,767,085.00

Going over the same process, we find the speculative excess

to be $22,110,094.86

11,990,515.75

We now find that the receipts of 1835 and 1836 exceed the

annual average for twenty years by ... . $34,100,610.61

This excess of $34.1 million, though calculated from the average of twenty
years, is probably a little too large. The time during which the average is
calculated included, before 1835, several years when credit was not given on the
sales, and after 1836 several years of depression.

Now as the receipts of 1834 were $4.9 million, and of 1837 $6.8 million, ap-
proximately, it will be fair enough to assume that the normal receipts of 1835
would have been about ........ $5.5 million

And for 1836 .......... 6. million.

Then we have the estimated normal receipts for 1835 and 1836, $11.5 million.

137

138 SURPLUS REVENUE.

Actual receipts for 1835 and 1836 $39,634,780.55

"•5

Estimated speculative increase for those years, consisting

largely of bank credits ....... $28.1

In the general account of the Government we have :

RECEIPTS, EXCLUDING LOANS. EXPENDITURES, EXCLUDING INTEREST.

1834, $21.8 million. 1834, $18.4 million.

1835, 35.4 " 1835, 17.5 "

1836, 50.8 " 1836, 30.9 "

$108.0 " $66.8

66.8

$41.2 " = the excess of receipts over expenditures in
those three years.

$41.2 million, excess of general receipts.
28.1 '" Speculative excess of land receipts.

513. 1 " = Approximately the surplus, excluding abnormal land receipts.
3, " But the speculative spirit caused unusually large importations to
be made, and thereby increased the customs. Three million dol-

$10.1 " lars may be assumed as the amount of this abnormal excess
though it was probably near five millions. Our result is that under ordinary
circumstances there would have been a surplus Jan. i, 1837, of about $10,000,-
000 instead of $41,000,000. There is only one further modification to be
made. The presence of the surplus notably increased Congressional expendi-
tures during 1836, so that about the excess of receipts was somewhat too small.
But making all the necessary allowances, the figures show that if the deposits
had not been removed to excite the speculation, and if the speculation had not
been excited in some other way, there never would have been anywhere near as
large a surplus.

APPENDIX II.

TABLES.

TABLE I. See p. 38.

Statement of amount on deposit in the N. Y. banks to the credit of the
Government, Jan. i, 1837, also the same April 26th, and the amounts credited
to the State April 26th. By subtracting the sum of the last two columns from
the first, we eet as a remainder the amount of Government funds withdrawn
from New York in less than four months.

Manhattan Company
National Bank
Phenix Bank ....
Mechanics' Bank . .
Merchants' Bank
Leather Manuf. Bank .
Bank State of New York
Lafayette Bank . . .
Dry Dock Bank . . .
Tradesman's Bank .
Merchants' Ex. Bank .
Seventh Ward Bank
Union Bank ....
Bank of America

Jan. 1st,
Government.

$2,143,325.78

320,000.00

1,089,160.00

3-739.050.00

728,880.00

450.00

345,000.00
150,000.00
201,000.00
380,000.00
375,000.00
709,634.29
2,664,017.73

$12,294,067.80

April 26th,
Governinent.

$770,577-76
170,000.00
170,795.00

1,000,000.00
346,100.02
200,089.27

134,000.00

80,000.00

94,676.92

50,498,21

149,813.57

248,634.20

1,267,624.00

$4,066,210.74
1,358,003.10

$6,125,213.14

April 26th,

State.
$206,005.96

180,000.00

205,000.00

65,000.00

325,000.00

50,900.00

106,347.14
210,000.00

&i, 358, 003. 10'

Amount withdrawn from 6,125,213.14

New York in less than

four months . . . .$6,168,854.66

This item to the credit of the State is only a trifle larger than one instalment.

TABLE IL See p. 40.

The table (taken from Mr. John Quincy Adams' speech " upon nouns, pro-
nouns, and adjectives," 53 Niles, 167) shows the amount due each State on Oct.

' 52 Niles, 227.

139

140

SURPLUS REVENUE.

r, 1837, the actual deposits in the deposit banks of each State in July and
August, 1837, to meet the general call for the payment of this fourth instalment,
the number of deposit banks in July and on Oct. 4, 1837, and the balances still
due Oct. 4, 1837. From this table it may be seen how great the deposits were
in the States where the land sales occurred, and how almost completely unavail-
able that part of the surplus was.

No. of

Deposits due to the several States on tlie

No. of dap. banks and
actual denosits lulv

deposit
banks

Balances still

first of Oct., 1837.

and .

A.ugust, 1837.

Oct. 4,

i8?7.

due Oct. 4, 1837

Maine $318,612

$117,042

$41,708

New Hampshire

223,028

114,026

63,635

Massachusetts

446,057

81,278

42,891

Rhode Island

127,445

5,433

l,X33

Vermont

223,028

588

466

Connecticut

254,890

31,629

7,409

New York

1,338.173

1,386,919

803,570

New Jersey

254,890

95.506

37,292

Pennsylvania

955. S38

255.445

131,857

Delaware .

95.583

2,906

Maryland .

318,612

280,198

212,102

Virginia

732,809

403,136

739,302

North Carolina

477,919

146,030

64,638

South Carolina

350,474

111,590

125,433

Georgia

350,474

172,269
1,020,856

119,706

Alabama

223,028

906,379

Mississippi

127,445

1,744,373

1,656,367

Louisiana .

159.306

1,450,023

918,749

Missouri

127,445

589.327

355,280

Kentucky .

477,919

843,246

845,053

Tennessee .

477.919

514.516

182,932

Ohio , .

669,086

1,127,979

960,061

Indiana

286,751

743,129

660,723

Illinois .

159,306

39,795

39.323

Arkansas

95.583

Michigan .

95,583

998,050

882,994

$9,367,214

$12,275,302

$9,801,921

These very suggestive figures Adams analyzed and commented upon at con-
siderable length with great vigor. There is room to quote only one or two para-
graphs.

" The balances due, therefore, from the deposit banks, in the single State of
Mississippi, a State with four electoral votes, are nearly one hundred thousand
dollars more than adequate to pay the whole fourth instalment receivable by her-
self, and by the six New England States."

" But observe that, through the whole of September, although the deposit act
of 23d June, 1836, was in full force, the Secretary of the Treasury continued to

SURPLUS REVENUE. I4I

draw from the banks of the North to the amount of more than eight hundred
thousand dollars of those balances, which ought to have been applied toward the
payment of the fourth instalment to the States of the North ; while, at the same
time, he left in the Southwest and Western States nearly seven millions and a
half, nearly five millions more than the fourth instalment, which they were en-
tilled to receive."

A considerable portion of these unavailable deposits remained unpaid for a
long time.

The Treasury Report, Dec, 1838, mentioned the following " funds, not im-
mediately available, in the Treasury " :

($28,101,644.97 deposited with the States.)

$1,100,000 " due chiefly from various insolvent banks, on account of money
that before 1837 had been placed in their custody to the credit of the Treasurer,
and still remains unpaid."

$2,400,000 "due from banks that suspended specie payments in 1837, and
will probably not be paid during the present year." — 55 Niles, 242.

TABLE III.

Illustrating tJie Great Arbitrary Movements of Money In the

Months Before the Crisis.

This table shows the amounts that each State received (ist col.), the amounts
on deposit, June 20, 1836 (2d col.), and Dec, 19, 1836 (3d col.), and the pos-
sible or the necessary transfers of money to or from each State between Dec.
19, 1836, and July, 1 837, in order that the first three instalments might be paid
(4th col.), (transfers to or necessary transfers are marked plus, and transfers
from or possible transfers, i. e., the excess over the requirements of the first
three instalments in the given State, mi7tus). A comparison of cols. 2 and 3
shows, of course, the transfers that took place between June 20th and Dec.
19th. Col. 5 shows the transfers that took place before July or Aug., 1837.
The arrangement of the States is by their position, so far as possible, so as to
show the magnitude of the transfer in general.

' These figures are found by adding to or substracting from the figures in
col. 4 the sums on deposit in the respective States in July, 1837, e. g., $448,-
234.25 had to be transferred to Maine to distribute the first three instalments ;
but in July there is still $117,042 on deposit in Maine. These sums added
together give approximately the actual transfers to Maine. In States possess-
ing ports of entry and land offices, the account would be modified somewhat,
but this influence would generally balance itself. I say " at least" because if
the banks of Maine did not pay up promptly, their deficiency would have to be
supplied from other States. This was probably the case in Tennessee, for in-

142

SURPLUS REVENUE.

States.

Am't de-
posited with
the States. —
Col. 1.

Am't. on

deposit in

the banlcs

of the

States,

June 20,

1836.—

Col. 2.

Amt. on

deposit in

the banlcs

of the

States,

Dec. 19,

1836.—

C6l. 3-

The necessary
transfer to, or pos-
sible transfer
from, before July,
i837.-Col. 4

The actual trans-
fer between Dec.
19, 1836, and July,
1837, was at
least.^— Col. s.

Maine .
New Hampshire
Vermont .
Massachusetts
Rhode Island .
Connecticut .
New York .
New Jersey .
Pennsylvania .
Delaware .
Maryland .
Virginia
North Carolina
South Carolina
Georgia
Alabama .
Mississippi
Louisiana .
Tennessee .
Kentucky .
Ohio . . .
Indiana
Illinois .
Missouri . .
Arkansas .
Michigan .

$955,838.

66g,oS6.

66g,oS6.
1,338,173-

382,335.

764,670.
4,014,520.

764,679.
2,867,514.

286,751.

955,838.
2,198,427.

1,433,757.
1,051,422.
1,051,422.

669,086.

382,335.

477,919.
1, 433, 757.
1,433,757.
2,077,260.

860,254.

477,919.

382,335.

286,751.

25
79
79
57
30
60

71
60

78
49
25
94

39
09
09

79
30
14
39
39
■34;

44'

^4|
30

49
49

% 231,829
180,200

52,975

2,077,164

112,084

103,839

12,108,322

None.
2,643,179
None.
1,447,663

489,951

129,625

484,680

637,011

1,057,740

1,619,564

2,568,355

631,289

400,037

1,520,979

1,021,195

None.
1,890,304

None.
1,895,175

$ 507,604

632,285

162,315

2,386,476

349,758

741,063

11,536,271

534,004

2,684,880

170,000

1,225,210

1,238,660

660,697

936,576

558,904

1,407,505

1,791,558

4,382,308

492,433
1,802,846
3,130,881
2,136,419
45,616
1,880,628

None.
1,462,222

+ $448,234.25
+ 36,801.79

+ 506,771.79

— 1,048,302.42

+ 32,577-30

+ 23,670.60
-7,521,750.29

4- 230,675.60

+ 282,634.78

+ 116,751.49

— 269,371.75

+ 959,767.94

+ 773,060.39

+ 114,846.09

+ 492,518.09

— 738,418.21^

— 1,409,222.70
-3,904,388.86

+ 941,324.39

— 369,088.61

— 1,053,620.66

— 1,276,164.54
-I- 432,303.14

— 1,498,292.70
+ 286,751.49
-1,175,470.51

+ $565,276.25
+ 150,827.79

+ 507,359-79

— 962,024.42
4- 38,010.30
+ 55,299.60
-6,134,831.29
+ 267,967.60
+ 538,079.78
4- 119,657.49
+ 10,822.25*
+ 1,362,903.94
+ 929,090.39
+ 225,436.09
4- 664,787.09
+ 167,960.79''
-h 247,144.30
-2,454,365.86

4-1,455,840.39

4- 474,157-39

+ 76,358.34

- 533,045.54
+ 472,098.14

— 908,965.70
4- 286,751.49

- 187,420.51

' (The note begins on the previous page.)
stance, for only $941,324.39 was required from abroad to complete the three in-
stalments, while $1,455,840.39 was sent in, more than enough to pay all four
instalments, whence it would appear that none of the $492,433 (in col. 3) had
been available. The excess of the figure in col. 5 over the three instalments,
if added to the $492,433, makes a sum nearly equal to the deposits in the
Tennessee banks, July, 1837. See Table II. above.

"Where a plus figure in col. 5 follows a minus in col. 4, it shows that the
given State, though containing deposits in its banks in excess of its share of
the surplus, found it impossible to collect these deposits. Miss, and Ohio are
good instances of this state of affairs. It is to be noted that New York fur-
nished about three fifths of the amount transferred to other States. (This table
was constructed from the data of the one in Niles 51, 306, and the one quoted
from Niles 53, 169.)

SURPLUS REVENUE.

143

TABLE IV.

The surplus was divided among the States according to their electoral vote,

or on the basis of direct taxation. But since the electoral vote of each State

in 1837 was based upon the census of 1830, -i. per capita division of each State's

share according to the census of 1830 will very strikingly show the great gain of

Am't. to

Atn't to

each free

States.

"3
0

The share received
by each State.

each free
person
(census

person

(estimated

popula-

of 1830).

tion,
1837).'

Alabama

$669,086.79

$3.48

$2.28

Arkansas

286,751.49^

II. II

4-57

Connecticut

764,670.60

2-57

2.50

Delaware

286,751.49-

3-90

3.82

Georgia

1,051,422.09

3-50

2.55

Illinois

477,919.14

3-04

1.49

Indiana

860,254.44

2.51

1.48

Kentucky .

1,433,757-39

2.74

2.22

Louisiana .

477,919.14

4.50

2.98

Maine

955.83S.25

2-39

2.02

Maryland .

955,838.25

2.77

2.54

Massachusetts

1,338,173.5s

2.19

1.91

Michigan

286,751.49-.

9.07

1.63'

Mississippi .

382,335.30

5.39

2.59

Missouri

382,335-30

3.31

1.99

New Hampshire

669,086.79

2.49

2.39

New Jersey

764,679.60

2.40

2.15

New York .

4,014,520.71

2.09

1.76

North Carolina

1,433,757-39

2.91

2.85

Ohio .

2,077,260.34

2.21

1-54

Pennsylvania

2,867,514.78

2.13

1-77

Rhode Island

382,335.30

3-93

3-73

South Carolina

1,051,422.09

3-96

3-94

Tennessee .

1,433.757.39

2.65

2.32

Vermont

669,086.79

2.38

2.33

Virginia

2,198,427.94

2.96

2.81

' The estimated population of 1837 has been obtained by adding seven tenths
{-^ of the increase of free persons in the years 1830-40 to the number of free
persons in 1830. I have used in the calculation the free population, at con-
siderable trouble, to show the gain of the slave-holding States from their slave
representation, a gain not offset at that time by any direct taxation worth men-
tioning. At this time, by act of Congress, 1832, one representative was returned
for every 47,700 of representative population.

''Calculated on the Michigan census of 1837.

144 SURPLUS REVENUE.

the sparsely populated States by such a ratio of division. This division is
found in the first of the subjoined columns, while the second shovk^s the changes
in the per capita shares wrought by the increase of population.

It may be noted that Michigan's share per capita decreased the most with the
increase of population, and that South Carolina's decreased the least. These
tables are also highly interesting as showing the inequality of the burdens that
would have fallen upon the States in case an expensive foreign war had neces-
sitated at that time heavy direct taxation. In 1837, if $28,101,644.91 had been
raised by direct taxation rich New York, would have contributed $1.76 per free
person, and poor wild Arkansas $4.57 per free person. Under the same circum-
stances Massachusetts would have contributed $1.91, and Rhode Island $3.73.
Of course the offset to this inequality was the proportionately larger voice that
the small States had in public affairs.

APPENDIX III.

A list of the towns in Massachusetts that appropriated more or less to educa-
tion from the surplus revenue during the years 1841 and 1846.

Barnstable Co
Barnstable
Eastham
Falmouth
Harwich
Sandwich
Wellfleet

Berkshire Co.
Becket
New Ashford
New Marlborough
Sheffield
Tyringham

Bristol Co.
Dighton
Rehoboth
Seekonk

Dukes Co.
Tisbury

Essex Co.
Dan vers
Georgetown
Haverhill
Newbury

Franklin Co.
Montague
Whately

Hampden Co.
Palmer .
Springfield
Tolland
Wilbraham

I84I

1846

$450.00

$331.00

75.00

299.31

100.00

372.01

112.50

87.00

129.52

34-58

204.78

180.00

177.25

167.25

171.00

139.20

242.00

140.00

276.60

90.00

299.00

53T.I8

3S2.50

183.61

168.06

•

150.00

174.00

936.51

I06T.84

84.60

84.00

235.59

246.70

145

146

SURPLUS REVENUE.

Hampshire Co
Cunnington
Granby
Hatfield
Middlefield
riainfield
Southampton
Worthington

Middlesex Co
Ashby
Bedford
Billerica
Brighton
Dracut
Holliston
Lexington
Lincoln

Norfolk Co.
Bellingham
Dover .
Needham
Sharon
Stoughton
Wrentham

Plymouth Co.
Duxbury
Marshfield
North Bridgewater
Plympton

Worcester Co.
Douglas
Mendon
Uxbridge

Total

I84I

1846

$156.00

$150.00

100.00

113.74

90.00

90.08

II9.I3

150.00

146.98

40.00

90.00

75.20

58.93

23.71

180.00

60.00

88.50

140.62

140.63

52.50

60.00

131.20

180.06

180.00

336.46

341.84

220.00

228.00

99.71

91.71

276.20

42.80

142.05

415-29

131.75

247.00

$6,625.95 $8,392.99

Examples of the use of the Surplus in other towns. — During my in-
vestigations of this subject I sent out about forty circulars to the town clerks of
the chief cities and towns in Massachusetts, to learn how much was received by
those towns, the use made of the money, whether any was lost, whether it had
been a benefit, whether it had led to extravagance, etc, etc. The following in-
formation was gained ;

SURPLUS REVENUE. 1 4/

Amherst received $5,491.01. — The money was loaned at first and then later
$4,433.17 was paid for a farm, and $1,219.12 for a new barn thereon. The
farm has served as a poor-farm since. In 18S2 the buildings were burned, but
were well insured. $408.37, made up of the interest and the residue of the
principal, was used for town expenses in 1839 or 1S40. The surplus has been
regarded as " a great benefit." None of it has been lost.

Andover received $9,707.40, which was "aliased in paying town debts."
It was a benefit.

Boston received $140,599.83. — The money was used for city expenses in
1838, and some loans authorized by the city council were not negotiated, as the
surplus in the bank drew less interest for the city than would have been paid
for a loan. (See Auditor's Rep., Dec, 1838.)

Cambridge. — No records in the clerk's office state the amount of the surplus
falling to the town. The money was put in the town treasury,

Danvers. — Upon the division of the town in 1855 Danvers received about
$4,500. At first it was considered a liability of the town, and the income was
appropriated to schools. In 1S59 the " liability" theory was discarded and the
money considered town funds. " It did not lead to any unusual or extravagant
expenditure."

FiTCHBURG received $4,856.04, and the money was used to pay the debt of
the town. The city treasurer cannot learn that the money led to any
extravagance, and believes it was a great benefit, as it "lightened the public
burdens for the next few years," a period of general distress in business.

Groton received $4,115. — " Just about the time this money was received a
heavily loaded, seven-horse team, driver and all, fell through a bridge over the
Nashua River, causing a loss or damage of about $3,000, and this $4,115 was
regarded by many as a real Godsend to meet that occasion, though the money
was actually used by the town to pay its "interest-bearing indebtedness."
Certainly a benefit.

Lee. — Amount unknown ; used partly to pay off the town debt and partly for
the benefit of schools.

Lynn received $14,897.00, and the money was used to pay the town debt.

Nantucket received $16,255.45, and it was used to pay the debt in part.
" A very great benefit."

New Bedford received $18,258.95. — The money was " expended in the
erection of a town hall." The work was economically done, and the surplus
was a benefit.

Newburyport received $14,843. — The money was loaned to the State till
June I, 1843, when $15,776.26, credited to the " surplus revenue," was appro-
priated for public improvements. This sum probably includes the original

148

SURPLUS REVENUE.

principal and the accrued interest. $5,000 was appropriated to the school
department, and was used mainly for repairs and new buildings. $348.75 was
spent for globes and maps, and $500 for philosophical apparatus.

$5,000 was appropriated for the fire department, and the residue for town re-
pairs. The accounts of the town show a little change from this program, as
follows :

New Brick Barn for Poor Dep't . . . $3,253.79

Expended on Aims-House .
School Dep't and Buildings
Highways ....
Fire Dep't ....

" " for Reservoirs
Public Park or Mall and Pond
Incidental Expenses

274-09 $3,527-88
5.400.75
1,565-37

$1,870.03
1.879-39

3.749-42

1,403-30

129.54

$15,776.26
" It appears from the above statement that the money was very judiciously
expended, that the inhabitants of this city are at the present time receiving
benefits from the surplus revenue — having in possession and constant use the
public buildings and other improvements paid for by said revenue."

Salem received $29,790.23, which was " appropriated as follows :
" Payment of part of city debt .... $8,000.00
" Repairs on building occupied by insane poor . 600.00

" Erection and furnishing of City Hall . . 21,190.13

"$29,790.13"

The work was economically done and was a benefit to tlae town.

Sandwich received " about $3,500. — It was loaned to individuals ; none of it
was lost. In the year 1856 the roads of the town were, on account of the very
unusual fall of snow, rendered impassable, again and again, so that the expenses
of clearing amounted to that sum ; — the town in consequence voted to use said
revenue to pay the expense, which was done. I presume the work was as
economically done as in any other service performed."

Sheffield received $4,940,96. — It was loaned on the security of " individual
names, residents of the town." $700 is now " missing."

The interest was appropriated for schools. Later the principal was for town
purposes, like building bridges. The work is thought to have been economically
done, and was " without question " a benefit.

Springfield received $15,764.00. — It was at first loaned on real-estate mort-
gages, and the interest "applied to the support of schools." Later the principal
was applied " to the payment of the town debt." " Certainly " a benefit.

These instances are good examples of what was done through the State and
in New Hampshire as well.

APPENDIX IV.

The appropriations for schools made from the ' ' Surplus Revenue " by the
towns in New Hampshire during four years.

1865-6.

1868-9.

1869-70.

1870-1.

Rockingham Co.

Brentwood ....
East Kingston . . .

Epping

Londonderry ....

Rye

Salem

Strafford Co.

Dover

Farmington ....
Madbury

Belknap Co.
Centre Harbor . . .

Milton

New Durham ....
New Hampton .

Carroll Co.

Brookfield

Hart's Location . .
Moultonborough .

Sandwich

Tamworth

Tuftonborough .
Wakefield

Merrimack Co.

Dunbarton

Henniker

Hopkinton ....
New London ....

Hillsborough Co.

Amherst

Bennington ....
Francestown ....

Hudson

Litchfield

36.09

100.00

50.00

12.12
60.00

1-44
14-30

12.00

■ 13.98
48.00

• • •

1 00. 00

180.00
25-83

8.00

7.00
2.00

'28.74
42.00
24.00

$268.63

36.09

240.00

100.00

500.00
120.00

18.03
* \'

9.00

72.00
14.30

153-54

12.00
17.00

lOO.CO

220.00

180.00
12.42

30.00
67.20

124.00

72.00
108.00

14.37
54-14

101.79
265.64

149

150

SURPLUS REVENUE.

1865-6.

1868-9.

1869-70.

1870-1.

Cheshire Co.
Chesterfield
Marlow . .
Richmond .
Ringe . .
Troy . .
Westmoreland
Winchester

Sullivan Co.
Acvvorth
Cornish .
Goshen .
Langdon
Newport

Grafton Co.
Bethlehem .
Bridgewater
Canaan .
Enfield . .
Hanover
Haverhill .
Landaff
Lebanon
Lyman .
Orford . . .
Plymouth .
Waterville .

Coos Co.

Clarksville . .
Dalton . . .
Dummer
Milan . . .
Whitefield . .

141

350

52
240

9
19

.00

-98
-50

.00

-32
.40

.00

60.30

75-25

• • •

23-24
119.00

55.98
90.00

162.04
42.95
45.18

100.00

• • •

27.00

57.20
60.30

56.00
117.20

90.00

162.00
87-44

2.25

42.98
352.07

2.00

26.00
27.00

60.30

78.00

88.14

202.00

100.00

93.60

70.00
160.50
160.1S

85-35

3-17
232.00

100.00

25-87

932
21.00
27.00

$1,277-13

$1,278.51

$2,663.03

$2,765.99

Total for 1864-5, $1,203.64 ; for 1871-2, $2,508.52.
(The School Reports for those years.)

BIBLIOGRAPHICAL INDEX.

INTRODUCTORY NOTE.

When I began to search for materials for the foregoing account of the various
uses to which the States put the surplus revenue, I was much embarrassed by
not knowing where to turn for information. Very little help could be got from
any one else, as the ground was almost untrodden.

Under these circumstances it seemed best to give an exact reference for every
important statement, so that the work could easily be verified, and to furnish a
bibliographical index to present as a whole all the sources from which I had
drawn, for the double purpose of showing succeeding students where to look for
original matter, and of enabling them instantly to tell whether they have dis-
covered any facts to which I failed to gain access.

My chief source, it will be seen, has naturally been the acts of the Legisla-
tures of the various States. I cannot hope, however, that I have exhausted this
mine, for every one who has had experience with these documents knows how
imperfectly they are indexed ; yet as some five hundred volumes were to be con-
sulted, it goes without saying that the indexes had to be relied upon. The
difficulty was increased by the varying titles under which the matter appeared.
In dealing with this subject one cannot feel at all sure that he has done his best
with an index till he has looked for the titles : " Appropriations," " Deposits,"
"Education," "Money," "Public Deposits or Money," "Revenue," "Sur-
plus," and " United States," unless he has previously learned the names used in
the State.

In the case of the " American Almanac," " Niles' Register," and " Hazard's
Register," no reliance was placed upon the indexes, but more than twenty vols,
each of the Almanac and Niles were examined page by page.

A word about the arrangement of this index. The general arrangement is
alphabetical. All general authorities, then, are in alphabetical order ; all
authorities, on the other hand, that have been used for one State only, are to be
found in their alphabetical order under the name of that State, following the
State documents, which have been arranged chronologically, except that, in gen-
eral, Acts precede Reports. Finally, the general authorities used for any one
State are summarized in italics at the end of the list under that State.

Adams' Gallatin : The Life of Albert Gallatin. By Henry Adams. J. B.
Lippincott & Co., Philadelphia, 1879. ^ vol. 8vo.

151

152 SUJiFLUS REVENUE.

ALABAMA.

Acts : Acts of the General Assembly of Alabama, for 1836, Ferguson, Tusca-
loosa, 1836 ; for 1853-4, Brittan & Blue, Montgomery, 1854 ; for 1855-6,
Bates & Lucas, Montgomery, 1856 ; for 1868, J. Stokes & Co., Mont-
gomery, 1868 ; for 1874-5, W. W. Screws, Montgomery, 1875 ; for 1876-7,
Barrett & Brown, Montgomery, 1877.

Clay : A Digest of the Laws of the State of Alabama, containing all the statutes
of a general nature in force in Feb., 1843. Compiled by C. C. Clay.
M. J. Slade, Tuscaloosa, 1843.

Code of 1876 : The Code of Alabama, 1876. Prepared by "Wade Keyes, Fern.
M. Wood, and John D. Roquemore, successor to Fern. M. Wood. Bar-
rett & Brown, Montgomery, 1877.

Walker : The Revised Code of Alabama. Prepared by A. J. Walker. Reid
and Screws, Montgomery, 1867.

Armstrong : Report of H. Clay, Superintendent of Education of Alabama, for
the year ending Sept. 30, 1S82. W. D. Brown, Montgomery, 1883.
{General Authorities : Am. Aim., 1847 ; Eaton; I Financ. Reg.; 5 Hazard ;
and Niles, vols. 57, 63, andb"].)

Am. Alm. : The American Almanac, vols. 8-32. Boston, 1837-61 (various
publishers).

Am. St. Ann. : American Statistical Annual for the year 1854. Compiled by
Richard Swainson Fisher, M.D., and Charles Colby, A.M. J. H. Colton
& Co., New York, 1854.

American Year-book : The American Year-book and National Register for
1869, etc., etc. Vol. ist. edited by David N. Camp. O. D. Case & Co.,
Hartford, 1869.

ARKANSAS.

Acts : The Acts passed at the fourth session of the General Assembly of
Arkansas, 1842-3 ; E. Colby, Little Rock, 1843. The Acts of the seventh
session, etc., 1848-9 ; Little Rock, 1849. The Acts of the eighth session,
etc., 1850-1 ; Little Rock, 1851.

English : Digest of Laws in force in 1846 ; with notes of Superior-Court de-
cisions. By E. H. English. 8vo. Pub. by the State, Little Rock, 1848.

Gould : Digest of Statutes in force in 1856 : with notes of Superior-Court
decisions. By J. Gould. 8vo. Pub. by the State, Little Rock, 1858.
{General Atithorities : Am. Aim., 1845, 1856 ; Ain. Statis. Annual, 1854 ;
1 Bankers' Mag.; Hunt; and Trotter^

Bankers' Mag.: The Bankers' Magazine and State Financial Register, etc.
J. Smith Homans, Baltimore, 1847. Vols, i, 5, and 8.

Benton's Abridgt. : Abridgment of the Debates of Congress from 1789-1856.
By the author of Thirty Years' View. D. Appleton & Co., New York,
1857. Vols. 9 and 11.

SURPLUS REVENUE. 1 53

Benton : Thirty Years' View ; or, A History of the Working of the American

Government for Thirty Years, from 1820 to 1850. By a Senator of thirty

years. D. Appleton & Co., New York, 1854. 2 vols., 8vo.
Blaine : Twenty Years of Congress : From Lincoln to Garfield. By James

G. Blaine. Henry Bill Pub. Co.. Norwich, Ct., 1884.
Boston Courier : The Boston Semi-Weekly Courier. Buckingham & Foote,

Boston, 1836-7.
Boston Recorder : The Boston Recorder (religious weekly). Boston, 1836.
Calhoun's Works : The works of John C. Calhoun. Edited by Richard K.

Cralle. D. Appleton & Co., New York, 1854-7. 6 vols., 8vo.
Clay's Works : The Life, Correspondence, and Speeches of Henry Clay. By

Calvin Colton, LL.D. A. S. Barnes & Co., New York, 1857. 6 vol., 8vo.
Cong. Record : Congressional Record. Containing the Proceedings and

Debates of the 48th Congress, ist session. Washington, Government

Printing-office, 1884.

CONNECTICUT.

Acts : The Public Statute Laws of the State of Connecticut, passed at the
May and December sessions of 1836, and the May session of 1837. John
R. Boswell, Hartford, 1837.
Public Acts passed by the General Assembly of the State of Connecticut,

May session, 1855. Thomas H. Day, Hartford, 1855.
The General Statutes of the State of Connecticut. John H. Burnham, New
Haven, 1866.
Report : First Annual, of the Secretary of the School Board, 183S. (Pub. in
the Connecticut Common-School Journal. Ed. by Henry Barnard, 2d.
Case, Tiffany, & Burnham, Hartford, 1842.)
Annual Report of the Board of Education of the State of Connecticut, 1884.

Tuttle, Morehouse, & Taylor, New Haven, 1884.
{General AtUhorities: The New Haven Herald and Eaton.)
Conn. Courant : The Connecticut Courant, Hartford, 1836-7.

DELAWARE.

Acts : Laws of the State of Delaware passed in 1837, S. Kinney, Dover, 1837 ;
in 1839, etc., 1839 ; in 1843, etc., 1843 ; in 1845, etc., 1845 ; in 1847, etc.,
1847 ; in 1881, etc., 1881.

Revised Statutes of the State of Delaware (to 1852 inclusively). Samuel Kin-
ney, Dover, 1852. Revised Statutes of the State of Delaware of 1852
(brought down to 1874, with additions and amendments). James &
Webb, Wilmington, 1874.
Digest of Laws Relating to Free Schools in the State of Delaware. J. Kirke
& Sons, Dover, 18S1.

154 SURPLUS REVENUE.

Report, Fifth Annual, of the Superintendent of Free Schools, for the year
ending Dec. i, 1880. Delawarean Office, Dover, 1881.
{^General author.: Eaton.')

Eaton : An Address on National Aid to Education. By Hon. John Eaton,
U. S. Commissioner of Ed. Government Printing-Office, Washington,
1879. (This address is also to be found in Circulars of Information of the
Bureau of Education, No. 2, pp. 123-134. Page 12 of the address, as
quoted in the work, corresponds to p. 123 of the Circular.)

Financial Register : The Financial Register of the United States. [Edited
by Condy Raguet.] 2 vols., 8vo. Philadelphia, 1837-38.

FOLGER : Annual Report of the Secretary of the Treasury on the State of the
Finances, for the year 1883. Charles J. Folger, Secretary. Washington,
1883.

Gales and Seaton : Register of Debates in Congress. Vol. III. Gales &
Seaton, Washington, 1S29.

GEORGIA.

Acts, The, of- the General Assembly of the State of Georgia for 1837, P. L.

Robinson, Milledgeville, 1838 ; for 1840, W. S. Rogers, Milledgeville,

1841 ; for 1S70, Atlanta, 1870.
Hotchkiss : A Codification of the Statute Law of Georgia. By William A.

Hotchkiss. J. M. Cooper, Savannah, and John F. Trow & Co., New

York, 1S45.
Lewis : A Letter to County School-Commissioners, etc., dated Dec. 19, 1871.

By J. R. Lewis, State Commissioner. Appended to the First Annual

Report of the State School-Commissioner. Atlanta, 1871.
Prince : A Digest of the Laws of the State of Georgia. By Oliver H. Prince.

Published by the author. Athens, 1837.
Reports: Bank Reports, 1841 and 1842; and a Report of the Central Bank

on Nov. I, 1841, in the Chronicle and Sentinel oi Augusta, Ga. (Novem-
ber ; date not known.)
(General Authorities : Am. Statist. Ann., Eaton, 5 Hazard, 51 and ^1 Niles.)
Globe : The Globe. Blair & Rives, Washington, 1836-7.
Hazard : Hazard's United States Commercial and Statistical Register, etc.,

etc. Edited by Samuel Hazard. W. F. Geddes, Philadelphia, 1839-41.

5 vols., 8vo.
Von Hock : Die Finanzen und Finanzgeschichte der Vereinigten Staaten von

America, Von Dr. Carl Freiherrn von Hock. J. G. Cotta, Stuttgart,

1867.
Hunt's Yr.-Bk. : Hunt's Merchants' Magazine Year-Book. W. B. Dana &

Co., New York, 18 71.

SURPLUS REVENUE. 155

ILLINOIS.

Acts: Laws of the State of Illinois, 1S36-7, W. Walters, Vandalia, 1837;

Laws of the State of Illinois, passed at the special session, July 10-22, 1837,

William Walters, Vandalia, 1837.
Report, Seventh Biennial, of the Superintendent of Public Instruction of the

State of Illinois.
{General Authorities : 4 Hazard, 52 and tl Niles.)

INDIANA.

Acts : Laws of a General Nature of the State of Indiana, passed 1836-7, Doug-
las & Noel, Indianapolis, 1837 ; in 183S-9, do., 1839 ; in 1840-1, do., 1841.
In 1S53, J. P. Chapman, Indianapolis, 1853 ; in 1855, A. H. Brown, In-
dianapolis, 1S55.

The Revised Statutes of Indiana, passed at the 27th session of the General
Assembly. Dowling & Cole, Indianapolis, 1843.

The Revised Statutes of the State of Indiana, 1852. J. P. Chapman, In-
dianapolis, 1852.

The Statutes of the State of Indiana, revision of 1876. By Edwin A. Davis.
Second edition, 2 vols., 8vo. Bingham & Co., Indianapolis, 1878.
Dillon : History of Indiana, from its earliest exploration by Europeans to 1816,
and thence to 1S56. J. B. Dillon. Bingham & Doughty, Indianapolis.

{General Authorities : Am. Aim., 1846, 1849, a«rt' 1852 ; Am. Siatis. Attn.,
1S54 ; I Bankers' Mag. ; Eaton ; 3 Hazard ; 51 atid 57 Niles ; The New
York Times, Dec, 1883 ; Trotter.)
Jefferson's Works : The Writings of Thomas Jefferson, etc. Edited by H.
A. Washington. Taylor & Maury, Washington, D. C, 1853. 9 vols., 8vo.

KENTUCKY.

Acts : Acts of the General Assembly of Kentucky in 1836-7, A. G. Hodges,

Frankfort, 1837 ; in 1837-8, do., 1838 ; in 1838-9, do., 1839 ; in 1844-5,

do., 1845.
Pickett : Report of the Superintendent of Public Instruction for the years

ending June 30, 1880, and June 30, 1884. S. I. M. Major, Frankfort,

1882.
{General Authorities : Am. Aim., 1851, 1853; '■j Bankers' Mag.; 3,4, and

5 Hazard ; New York Journal of Coinvierce , 1836 ; 58, 59, and to Niles ;

Trotter.)
Knox : United States Notes ; A History of the Various Issues of Paper Money

by the Government of the United States. By John Jay Knox. Charles

Scribner's Sons, New York, 1884.

156 SURPLUS REVENUE.

LOUISIANA.

Acts : Acts of the first session of the 13th Legislature of Louisiana, 1837.
Jerome Bayon, New Orleans, 1837. Acts of the second session of the
same, 1837-8 ; Jerome Bayon, New Orleans, 1838.
Acts of the General Assembly of Louisiana, 1855. Emile La Sere, New Or-
leans, 1855.

VoORHiES : The Revised Statute Laws of the State of Louisiana up to iS6g.
Compiled and Edited by Albert Voorhies. B. Bloomfield & Co., New
Orleans, 1876.
{General Authorities : Am. Statis. Ami., Eaton, 66 Niles.)

Mackenzie : The Life and Times of Martin Van Buren, etc. By William L.
Mackenzie. Cooke & Co., Boston, 1846.

MAINE.

Acts : Public Acts of the State of Maine, Jan. Session, 1837 ; Smith and Rob-
inson, Augusta, 1837. The Same for the Jan. Session of 1838 ; L. Sev-
erance, Augusta, 1838.

Shepley : Reports of Cases Argued and Determined in the Supreme Judicial
Court of the State of Maine. By John Shepley, Counsellor-at-Law.
Glazier, Masters, and Smith, Hallowell, Me., 1839, (Vol. XIV., Maine
Reports.)
{General Authorities : Eaton; The Philadelphia Press, Nov., 1883.)

MARYLAND.
Acts : Laws Made and Passed by the General Assembly of the State of Mary-
land, in 1836-7, Jeremiah Hughes, Annapolis, 1837 ; in 1837-38, do., 1838.
{General Authorities : Am. Aim., 1840 ; Atii. Statis. Ann., 1854 ; i Bankers'
Mag. ; 2 Hazard; 51, 52, 57, 59, and t'}, Niles.)

MASSACHUSETTS.

Acts : Supplements to the Revised Statutes : General Laws of Massachusetts

passed subsequently to the Revised Statutes. Vol. I. (1836-53). Dutton &

Wentworth, Boston, 1854.
Reports : The 5th and loth Annual Reports of the Board of Ed. of Mass.

Dutton & Wentworth, Boston, 1842, 1847.
{General Authorities : Blair's Globe, Dec, 1836 ; The Boston Courier, 1837.)
Mercer (Charles Fenton) : An Exposition of the Weakness and Inefficiency of

the Government of the U. S. (Printed anonymously, 1845.)

MICHIGAN.

Acts : Acts of the Legislature of the State of Michigan, passed in 1835-6, J.
S. Bagg, Detroit, 1836; in 1837, do., 1837; in 1837-8, do., 1838; in
1839, do., 1839 ; in 1840, G. Dawson, 1840 ; in 1841, do., 1841.

SURPLUS REVENUE. 157

Curtis : A Memoir of Benjamin Robbins Curtis, LL.D. ; with some of his
Professional and Miscellaneous Writings. 2 vols., 8vo. Edited by his
son, Benjamin R. Curtis. Little, Brown, «& Co., Boston, 1879.

N. B.— The article quoted, " Debts of the States," was first published
in the Noi-th American Review, Jan., 1844.
{General Authorities: Am. Aim., 1842, 1847, 1848; 51, 56, b'i Miles; Trotter.)

MISSISSIPPI.

Acts : Laws of the State of Mississippi, from the Jan. Session, 1824, to the
Jan. Session, 1838 ; Jackson, 1838. Laws Passed at an Adjourned Session,
1839 ; B. D. Howard, Jackson, 1839.

Democratic Rule : Nine Years of Democratic Rule in Mississippi. Jackson,
1847. (Published anonymously, but written by G. L. Potter.)

MISSOURI.

Acts : Laws of the State of Missouri, passed 1836-7, C. Grum, Jefferson,
1837 ; in 1S38-9, do., 1839 ; in 1842-3, A. Hammond, 1843 ; in 1852-3,
James Lusk, 1853.
The Revised Statutes of the State of Missouri, 1855. By Charles H. Har-
din. 2 vols., 8vo. James Lusk, Jefferson, 1856.
The General Statutes of the State of Missouri, passed 1866. E. S. Foster,
Jefferson, 1866.
Myers' Supp.: Myers' Supplement to Wagner's Missouri Statutes, by William
G. Myers, Esq. W. J. Gilbert, St Louis, 1877.
The Revised Statutes of the State of Missouri, 1879 ; 2 vols. 8vo. Carter &

Regan, City of Jefferson.
(General Author.: Eaton.)
Nat. Al. and A. R.: The National Almanac and Annual Record (for 1863 and

1864). Geo. Childs, Philadelphia, 1863, 1864.
Nat. Intell.: The National Intelligencer. Gales & Seaton, Washington,
1836-7.

NEW HAMPSHIRE.

Acts : Laws of New Hampshire, passed at the Nov. Session, 1836, Cyrus Bar-
ton, Concord, 1837; the same, passed June, 1838, do., 1838 ; the same,
passed June, 1839, do., 1839 ; the same, passed June, 1841, Barton & Car-
roll, Concord, 1841.
The Revised Statutes of the State of New Hampshire, passed Dec. 23, 1842.

Carroll & Baker, Concord, 1843.
The General Statutes of the State of New Hampshire, 1867. J. B. Clarke,
Manchester, 1S67.

Reports : Annual Report of the Board of Education of New Hampshire, for
1865-6, G. B. Jenks, Concord, 1866 ; for 1868-9, J- B. Clarke, Manches-

158 SURPLUS REVENUE.

ter, 1869; for 1869-70, do., 1870 ; for 1870-71, O. C. Moore, Nashua, 1871.
{General Authorities : Am. Aim., 1850; Blair's Globe. Dec, 1836; Boston
Courier, Dec, 1836 ; 5 Hazard ; Nat. Aim. and Ann. Rec, 1864 ; A^ew
Yorker, Dec, 1836 ; 52 Niles.)
New Haven Herald : New Haven, 1836-7.
New Haven Palladium : New Haven, 1836-7.
New Haven Register : The Columbian Register, New Haven, 1836-7.

NEW JERSEY.

Acts : Acts of the General Assembly of New Jersey for 1836-7, Trenton, 1837 ;

for 1838-g, P. J. Gray, Camden, 1839 ; for 1867, Chiswell and Wurts,

Paterson, 1867.
Revision OF N. J.: Revision of the Statutes of New Jersey. J. L. Murphy,

Trenton, 1877.
Raum : History of New Jersey, etc., etc. By J. O. Raum. J. E. Potter & Co.,

Philadelphia, 1877.
{General Authorities : Atn. Aim., 1852-61 ; Boston Courier, Jan. 1837 ;

Eaton; Nat. Aim-, and Ann. Rec, 1863.)

NEW YORK.

Edmunds : Satutes at Large of the State of New York ; Edited by John W.
Edmunds. Weed. Parsons, & Co., Albany, 1869. 6 vols. 8vo.

Fay : Digest of the Laws of New York ; Comprising the Revised Statutes and
Statutes of General Interest, in force Jan. i, 1874. By Joseph D. Fay.
James Cockroft & Co., New York, 1876.

The American Protectionist : Marcus Hanlon, New York (June 9, 1853).

Reports : Annual Reports of the Comptroller of the State of New York, for
the years ending Sept. 30, 1882 and 1883. Weed, Parsons, & Co., Albany,
1883 and 1884.
{General Authorities : Am. Aim. passim ; Blair's Globe, Jatt. 1837 ; 5 Haz-
ard j 57 Niles ; and Seward's Works.)

New Yorker (The) : Pub. by H. Greeley & Co., New York, 1836-7. (Third
volume.)

New York Journal of Commerce : Edited by David Hale and Gerard Hal-
lock, New York, 1836-7.

New York Spectator : Francis Hall & Co., New York, 1837.

Niles : Niles' Weekly Register (Edited by PI. Niles, later by W. Ogden Niles,
and later by Jeremiah Hughes). Baltimore. Vols. 12, 31, and 50 to 73.

NORTH CAROLINA.

Acts : Laws of North Carolina, passed 1836-7, T. J. Lemay, Raleigh, 1837 ;
in 1838-9, J. Gales & Son, do., 1839 ; in 1848-9, T. J. Lemay, do., 1849 \
in 1850-1, do., 1851.

SURPLUS REVENUE. 159

The Revised Statutes of North Carolina, passed 1836-7 ; Turner & Hughes,
Raleigh, 1837.
The Treasurer's Report : Dec, 1840. (Communicated to the writer.)
{General Authorities : Am. Aim., 1858; American Year-Book ; \ Hazard;
Hunt ; 51 Niles.)

OHIO.

Acts: Acts of a General Nature, passed 1836-7, vol. 35, S. R. Dolbee, Co-
lumbus, 1837 ; in 1837-3, vol. 36, S. Medary, do., 1838 ; in 1840-1, vol.
39, do., 1841 ; in 1842-3, vol. 41, do., 1843 ; in 1849-50, vol. 48, Scott
& Bascom, do., 1850 ; in 1862, vol. 59, R. Nevins, do., 1862 ; in 1868-9,
vol. 66, Myers & Bro., do., 1869.

Statutes of the Slate of Ohio of a General Nature, in force 1840-1. S.
Medary, Columbus, 1841.

Statutes of Ohio of a General Nature, in force 1854 ; collated and compiled
by Joseph R. Swan. H. W. Derby & Co., Cincinnati, 1854.

The Revised Statutes of the State of Ohio, in force Jan. i, 1880. H. W.
Derby & Co., Columbus, 1879.

{General Authorities : Am. Aim., 1839, 185 1, and ff ; i and 5 Bankers'
Mag. ; 2 Hazard.)

PENNSYLVANIA.

Acts : Laws of the General Assembly of Pennsylvania, passed in 1835-6. Theo.
Fenn, Harrisburg, 1836 ; in 1836-7, do., 1837.

Reports : Report of the State Treasurer on the Finances of the Common-
wealth. Packer, Barrett, & Parke, Harrisburg, 1837.
Fourth Annual Report of the Common Schools, Academies, and Colleges of
the Commonwealth of Penn. Thomas H. Burrowes, Supt. Pecker, Bar-
rett, and Parker, Harrisburg, 1838.
Sixteenth Annual Report of the Superintendent of the Common Schools of
Penn., for the year ending June, 1849. Townsend Haines, Supt.

Penn. Finances : A Brief Review of the Financial History of Pennsylvania,
etc., etc. By Benjamin M. Mead. Lane S. Hart, Harrisburg, 1881,
{General Authorities: The American, Dec, 1883; Boston Recorder, Dec.,
1836; I Financial Register ; 2 Hazard; 55 Niles; The New Yorker,
Apiil, 1836 ; Philadelphia Press, Dec. 2Qth, 1S83.)

Reynolds : My Own Times ; embracing also the History of my Life. By John
Reynolds [Gov. of III., 1830-4]. Chicago Historical Society, Chicago, 1879.

RHODE ISLAND.

Acts : Public Laws of Rhode Island, passed since Jan., 1835 (publishers not
mentioned) ; since Jan., 1837 ; since Jan., 1840 ; in June, 1841 ; in June,
1842 ; in Oct., 1842 ; in May, 1843.

l6o SURPLUS REVENUE.

School Laws : Acts Relating to the Public Schools of Rhode Island. Provi-
dence, 1867.

Revised Statutes : The Revised Statutes of the State of Rhode Island and
Providence Plantations. Sayles, Miller, & Simons, Providence, 1857.

Stockwell : A History of Public Education in Rhode Island from 1836 to
1876. Edited by Thomas B. Stockwell. Providence, 1876.

Seward : Autobiography of W. H. Seward. Edited by F. W. Seward. D.
Appleton & Co., New York, 1877.

Seward's Works : The Works of William H. Seward. Edited by George E.
Baker. Redfield, New York, 1853. 3 vols. 8vo.

SOUTH CAROLINA.

Acts : Acts and Resolutions of the General Assembly in 1836, S. Weir, Colum-
bia, 1837 ; in 1837, do., 1838 ; in 1838, Pembertons, do., 1839 ; in 1839,
A. H. Pemberton, do., 1839.
Reports and Resolutions of the General Assembly of South Carolina, in 1840,
A. H, Pemberton, Columbia, 1841 ; in 1843, do., 1844 ; in 1847, A. G.
Sumner, do., 1847 ; in 1849, J- C. Morgan, do.", 1849. (These Reports in
the edition I used were found with the acts of the same year.)

McCuLLOCH ; Dictionary, Geographical, Statistical, and Historical. ByJ. R.
McCuUoch. Harper & Brothers, New York. 2 vols. 8vo.

Poor's Manual : Manual of the Railroads of the United States for 1869-70,
etc. ; and the same for 1883. By Henry V. Poor. H. V. & H. W. Poor,
New York, 1869.
{General Authorities : Am. Aim., 1845, 1853-61 ; i and 8 Bankers' Mag. ;

2 Financial Reg. ; The Globe, Sept., 1836, yan. 1837 ; 51, 55, 56 Niles.)
Statesman's Man. : The Statesman's Manual. By Edwin Williams. Ed-
ward VN^-ilker, New York, 1846. (2 vols. 8vo., paged consecutively.)

Sumner : Andrew Jackson as a Public Man, etc. By William Graham
Sumner. Houghton, Mifflin, & Co., Boston, 1882. (American Statesmen
Series.)

" Surplus" Question (The) : A Plain Statement of Facts Concerning the Na-
tional Revenue and General Taxation of the PeojDle. (No publisher. A

campaign document of the Penn. Republicans in favor of wholesale dis-
tribution.)

TENNESSEE.

Acts : Public Acts of Tennessee, passed at the called session of 1836, S.

Nye & Co., Nashville, 1836; passsed 1837-8, do., 1838 ; passed 1841-2 ;

D. Cameron, Murfreesborough, 1842 ; passed 1865-6, S. C. Mercer, Mur-

freesborough, 1866.
School Laws : Compilation of the School Laws of Tennessee. Published

with the Acts of 1853-4. McKennie & Brown, Nashville, 1854.

SURPLUS REVENUE. l6l

Report: First Report of the Superintendent of Public Instruction for the

State of Tennessee (John Eaton, Jr.). Geo. Edgar Gresham, Nashville,

1869.
{General Authorities : Am. Aim., 1849; Am. Statist. Aim., 1853; i, 4

Bankers Mag.; i Financial Reg.; i, 3. 5 Hazard ; 57, 63, 64, 67 Niles ;

Trotter. )
Thompson : Relief of Local and State Taxation through the Distribution of

the National Surplus. By Robert Ellis Thompson. E. Stern & Co.,

Philadelphia, 1883. (A series of articles reprinted from The American,

newspaper.)
Trotter : Observations on the Financial Situation and Credit of Such of the

States of the North American Union as Have Contracte<l Public Debts,

etc., etc. By Alexander Trotter, Esq. Longman, Orme, Brown, Green,

and Longmans, London, Dec, 1839.
United States Reports : Vol. CXL Banks & Brothers, New York and

Albany.

VERMONT.

Acts: Acts Passed by the Legislature of Vermont in October, 1836. E. P.
Walton, Montpelier, 1836.

The Revised Statutes of Vermont, passed Nov. 19, 1839. C. Goodrich, Bur-
lington, 1840.

The General Statutes of the State of Vermont, passed in 1862. Published
by the State, 1863.

The Revised Laws of Vermont, 1880. Tuttle &Co., Rutland, 1881.
Thompson : History of Vermont, Natural, Civil, and Statistical, etc. By
Zallock Thompson. Chauncey Goodrich, ^Burlington, 1842.

(Genl. Authorities : Am. Aim., passim.; i Bankers' Mag.)

VIRGINIA.

Acts : Acts of the General Assembly of Virginia, passed in 1836-7, T.

Richie, Richmond, 1837 ; the same, passed in the extra session of June

1837, do., 1837 ; the same, passed in 1838, do., 1838.
Report : First Annual Report of the Superintendent of Public Instruction.
Richmond, 1871.

{General Authorities : Am. Aim., 1857-8-9; Mercer; 51, 52, ^c) Niles.)
Webster's Corrsp. : The Private Correspondence of Daniel Webster. Edited

by Fletcher Webster. 2 vols. 8vo. Little, Brown, & Co., Boston, 1857.
Webster's Works : The Works of Daniel Webster. 6 vols. 8vo. Little,

Brown, & Co., Boston, 1851.
WiRTH : Geschichte der Handelskrisen, von Max Wirth. J. D. Sauerlander,

Frankfort-a-M., 1874. i vol. 8vo. 2te ; Aufl.

UNIVERSITY OF CALIFORNIA AT LOS ANGELES

THE UNIVERSITY LIBRARY
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Navigation in the Legislature of Virginia. Octavo

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G. P. PUTNAM'S SONS, Publishers, New York and London.

UNIVERSITY OF CALIFORNIA.

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Full text of "The history of the surplus revenue of 1837; being an account of its origin, its distribution among the states, and the uses to which it was applied"

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